Freddie Mac/Chase - Guidelines
I am working on a sale. Buyer is cash, as property won't qualify for financing (other than rehab financing) - anyways, I got a call from Chase that Freddie Mac has a "guideline" that you cannot buy property in trust or llc. I asked the negotiator to provide the guideline and she said I could "look it up" - So, knowing FM publishes their guidelines, I did look it up. Coudn't find it. I called Freddie Mac yesterday and spoke with someone in underwriting who said there is no such thing. LOL..she also said that the servicers should not be quoting guidelines they know nothing about.
I called Chase back and asked them to provide me with the written guideline from FM...they are now scrambling and calling FM themselves.
Thought you would all find this interesting. If someone can add to this, I'd appreciate it.
Replies to This Discussion
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Permalink Reply by Kevin - Greenville, SC on
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http://www.distressedpropertycoalition.com/pdf/DPC_Grassroots.pdf
When Freddie Mac tried to convince the world that short sale flipping was mortgage fraud, DPC
was there and got them to admit that there was no legal basis for the claim. When the Obama
Administration wanted to appoint an anti-private market solution nominee to oversee Fannie and Freddie,
DPC worked with the Senate and defeated the nomination. DPC was integral in working with the House
to pass legislation defunding the wasteful government housing solutions, instead calling for private
market solutions.
Institutions like Freddie Mac were stunned by our early success, mostly because they are so
accustomed to getting everything they want. But they and their ilk fought back. DPC needs your help to
reverse the radical agenda of those who have no faith or belief in the private industry. We need to reform
the short sale process, we need to take back seller financing, and we need to remove restrictions on
investor transactions imposed by Fannie and Freddie.
Perhaps most of all, we need to send a message. You, the people who create and offer real
solutions to problems, must tell the people who are nothing but a burden on taxpayers and purveyors of
failed ideas, that you have had enough.
Starting January 9, 2012 you can do just that. I know you are busy, so I will ask for three simple,
easy things from you that will make it easier to get what you need from Washington.
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Permalink Reply by Smitty on
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Right. Freddie Mac cannot CREATE LAW. It is LEGAL to buy property in an LLC, Trust, Inc. Unfortunately, there have been many sales denied because FM does what they want. I appreciate the DPC's efforts. I hope they succeed in their fight.
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Kevin, thank you for posting this. I applaud the DPC's efforts and hope their message is heard loud and clear. One amazing part in the post that rings true is FHA's suspension of 90 day wait on resale of short sale flips. It amazes me the FHA is allowing flipping, however Freddie MAC has imposed their own type of "illegal" restriction on resales of property, whether its a direct flip, property being in trust, LLC etc., which are all perfectly legal methods of buying and holding or reselling property.
Technically, all of the affidavits, addendums prohibiting resale of property cloud title which is NOT legal in most states. It's completely hypocritical of Freddie or any servicer to put these types of restictions on property. It's ok for FHA, but not Freddie?? C'mon.
OK, end rant.
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Fount it - http://www.freddiemac.com/singlefamily/preventfraud/docs/short_sale...
Some of the following red flags may occur with short sale flip fraud:
Title to the property has been transferred to a trust, LLC, or corporation, prior to the short sale closing.
The buyer of the property is a trust, LLC, or corporation.
The purchase contract contains language that indicates the buyer’s intent to resell the property.
An “Option Contract” is utilized, which indicates the buyer’s intent to simultaneously resell the property.
Buyer’s proof of funds letter is from his or her IRA or a transactional funding company
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I've seen this. It's to minimize flip fraud, however, still not written into their guidelines...this is more a less a publication of what to watch for for fraud. The negotiator I dealt with yesterday clearly said it was against Freddie Mac GUIDELINES. When I spoke to a Freddie Mac underwriter they said there is NO SUCH GUIDELINE. So I get they want to "warn" people, however, people buy property in Trusts every day.
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Permalink Reply by Bryant Tutas on
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Going out in the newsletter today
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Permalink Reply by Steve Capen on
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I have been told by several different lenders that Freddie doesn't like buyers to be a LLC and that you have low probability of getting an approval for a LLC. Basically I was told that it is not a guideline, but that I am wasting my time. We had buyer reduce offer a little (to compensate buyer for the cost and hassle) and resubmit in their name and put in name of LLC right after closing.
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Permalink Reply by Joy Baker on
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I ran in to this issue with BAC about 6 months ago and all we did was add the name of the Member who signed the P&S to the body of the P&S, i.e, instead of "Main Street, LLC" with John Smith's name only appearing at the end of the P&S, we changed it to "John Smith as Member of Main Street, LLC". Did the same thing on the HUD. They could live with that. Deed was done in the normal manner for an LLC.
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Permalink Reply by Tara Samney on
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It is a red flag for short sale fraud - property flips right from Freddie Mac's website: http://www.freddiemac.com/service/factsheets/pdf/preventing_servici...
It doesn't specifically say the buyer cannot be a trust or LLC, but it is a flag it could be fraud. I've encountered this along with transactional funding letters which can be gotten free online with no credit or asset check. Given some of the characters that have come to me with these items- yes, they straight out told me they were going to reassign it at closing or have another buyer "investor" lined up to sell it to before closing. That is why these items raises flags with the servicers. Freddie Mac's argument is debatable whether the market value is really being projected low if another buyer would pay more if they are not getting it. My beef is that these "investors" do not add actual value- just are trying to resell it right away the same same or a week later and pocket difference with no change to property.
Sounds like she used the wrong word by just saying "guideline"...it's a "guideline for servicers to follow for Freddie Mac" versus a Freddie Mac specific guideline.
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Permalink Reply by Pat Chadwell on
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While I can not answer to the guidelines point I had the same thing happen to me. The buyer ultimately took title in his name and immediately transferred it to his trust. The reason we were given was the lender was concerned that the seller might have a connection to the trust. As soon as the property transferred ownership I went to the county and recorded the change. It is really sad that the people that commit fraud are adding to the headaches of all future involved parties.
All the best,
Pat
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Ditto. It's b/c of these unscrupulous folks the rest suffer. Thanks Smitty for the warning. I saw this last year but others should be aware of why LLCs and trusts will create a servicer flag and be prepared in the beginning. I've gotten some of these transactional funding letters and go online to site where they get them free- and it tells them how to beat Freddie Mac and commit fraud by doing the flip right at or after closing. In addition to the questionable proof of funds- it also advises them to put it in a LLC.
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