Replies to This Discussion

Permalink Reply by Richard on August 28, 2011 at 7:35am

Hi again Eric,

 

This article is very similar in nature to the article published earlier this week.  Having family members working in this industry and being a buyer myself, short sales have plenty of shady stories here in Arizona.  It is ashame that many agents and buyers work hard and fair by the rules and, then only to come up short to someone that don't care about legality.  As a buyer and citizen, I am all for stopping this fraud. 

Start giving out felonies, seizing assets, issuing orange suits, jail time and jail cells!!

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Permalink Reply by Smitty on August 28, 2011 at 9:53am

The blacklist is VERY real.  I listened to a podcast with Robert Hagberg, who is the head of Freddie Mac's fraud division.  Unfortunately I also listened to a webinar from Attorney Ron Ballard who stated there are companies and agents on the list who don't deserve to be there and he fought to get someone OFF the list. 

 

Frankly I'm sooo sick of this topic, but I guess it needs to thoroughly be addressed.

There needs to be KEY ELEMENTS for fraud to be present. 

1) A material misrepresentation - Lie or

2) A material omission where there is a DUTY to disclose and

3) Reasonable reliance by the "victim"
IF ONE of these is missing there is NO civil fraud.
This info comes from Attorney Ballard.

 

How many short sale convictions have you heard about?  I can count only ONE which is the Connecticut case.  That was clearly fraud and misrepresentation.

 

Freddie mac's blog is VERY misleading and you have to TRULY understand some of what is being stated.
The key is DISCLOSURE.  Any Realtor or Investor dealing in short sales needs to DISCLOSE any key elements about the sale.

 

So - If you're related to the seller - DISCLOSE IT - you may need a different listing agent but better to be safe than sorry.

If your buyer and seller are related DISCLOSE IT

If you have a buyer flipping a property DISCLOSE it and make sure verbiage in in there that states the seller is immediately reselling the property for profit

DON'T REVERSE STAGE - If you're making the property look worse than it truly is, to get the BPO to come in low, you're doing something WRONG.

DON'T fudge estimates.

DISCLOSE your relationships

 

Now apparently according to Freddie, there is falsifying of loan docs going on and HUD-1's that seemingly skim profits.  I personally have never heard of this happening or seen it, but it would be nice if Freddie could give examples or cases of what they are seeing. 

 

Don't allow a straw buyer.  Now this one may be difficult for an agent to figure out, but here's an example.  Marty can't qualify for a loan on the house he wants, so he asks is brother James to get a loan and PRETEND that he's buying the house.  THAT'S a straw buying situation.  This is VERY DIFFERENT than if Marty doesn't have enough money to buy the house and James offers to fund the purchase and DISCLOSES it will be Marty living in the house, and James will be responsible for loan.  I've seen this all day long and the later is NOT FRAUDULENT.  CONTRARY TO POPULAR FREDDIE MAC belief TRANSACTIONAL FUNDING is NOT illegal.  I know they like to THINK it's illegal, but it is NOT illegal to have someone else fund your loan if you've disclosed it.

Flipping.  Is it legal?  YES IF IT'S disclosed. 

So what about a double closing.  Is it legal?  YES IF IT'S disclosed.  The buyer MUST disclose he is immediately reselling the property for profit. 

Do you submit all contracts as Freddie Mac wants?  For me, that's a resounding NO.  I bring my offers to the seller and the seller picks ONE if I'm LUCKY enough to have a multiple contract situation.  Until I have fully exhausted my efforts on that first contract, ONLY THEN will I move onto the SELLER'S next choice.

 

DON'T promise a homeowner you can "SAVE" them or their house.

DON'T take upfront fees (although my understanding is you will not be prosecuted for this now)

DON'T falsify a THING!  KEEP RECORDS.

 

It's unbelievable the amount of paperwork we have to deal with on these now and lenders are making it HARDER not easier to work through the short sale process because they want to MAXIMIZE their losses and in my opinion the only thing we can do is really keep a stiff upper lip and bare it.

 

 

 

 

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Permalink Reply by Eric Mieles on August 28, 2011 at 3:52pm

Thanks for the responses guys. Smitty, you are s,pot on partner. I agree with everything you said. Recently I've been approached buy several agents who have attended some investor event and saw guys pitching reverse staging, "attorney" negotiated ss for huge discounts, and a bunch of other things that get there motor running.

Thanks again.

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Permalink Reply by Holly B. Long on August 29, 2011 at 4:18am

How do you disclose that the seller and their real estate agent are brother/sister?  Do you need to do it in writing?  I have this situation with a CitiMortgage - where it wasn't until the package was submitted that the real estate agent let it slip that seller was his sister?  What should I do at this point?  He is the broker and it is his agency -so is just changing the listing agent enough?  We are hopefully getting close to approval time - but I feel that this situation needs to be addressed before an approval letter...Help??

Smitty said:

The blacklist is VERY real.  I listened to a podcast with Robert Hagberg, who is the head of Freddie Mac's fraud division.  Unfortunately I also listened to a webinar from Attorney Ron Ballard who stated there are companies and agents on the list who don't deserve to be there and he fought to get someone OFF the list. 

 

Frankly I'm sooo sick of this topic, but I guess it needs to thoroughly be addressed.

There needs to be KEY ELEMENTS for fraud to be present. 

1) A material misrepresentation - Lie or

2) A material omission where there is a DUTY to disclose and

3) Reasonable reliance by the "victim"
IF ONE of these is missing there is NO civil fraud.
This info comes from Attorney Ballard.

 

How many short sale convictions have you heard about?  I can count only ONE which is the Connecticut case.  That was clearly fraud and misrepresentation.

 

Freddie mac's blog is VERY misleading and you have to TRULY understand some of what is being stated.
The key is DISCLOSURE.  Any Realtor or Investor dealing in short sales needs to DISCLOSE any key elements about the sale.

 

So - If you're related to the seller - DISCLOSE IT - you may need a different listing agent but better to be safe than sorry.

If your buyer and seller are related DISCLOSE IT

If you have a buyer flipping a property DISCLOSE it and make sure verbiage in in there that states the seller is immediately reselling the property for profit

DON'T REVERSE STAGE - If you're making the property look worse than it truly is, to get the BPO to come in low, you're doing something WRONG.

DON'T fudge estimates.

DISCLOSE your relationships

 

Now apparently according to Freddie, there is falsifying of loan docs going on and HUD-1's that seemingly skim profits.  I personally have never heard of this happening or seen it, but it would be nice if Freddie could give examples or cases of what they are seeing. 

 

Don't allow a straw buyer.  Now this one may be difficult for an agent to figure out, but here's an example.  Marty can't qualify for a loan on the house he wants, so he asks is brother James to get a loan and PRETEND that he's buying the house.  THAT'S a straw buying situation.  This is VERY DIFFERENT than if Marty doesn't have enough money to buy the house and James offers to fund the purchase and DISCLOSES it will be Marty living in the house, and James will be responsible for loan.  I've seen this all day long and the later is NOT FRAUDULENT.  CONTRARY TO POPULAR FREDDIE MAC belief TRANSACTIONAL FUNDING is NOT illegal.  I know they like to THINK it's illegal, but it is NOT illegal to have someone else fund your loan if you've disclosed it.

Flipping.  Is it legal?  YES IF IT'S disclosed. 

So what about a double closing.  Is it legal?  YES IF IT'S disclosed.  The buyer MUST disclose he is immediately reselling the property for profit. 

Do you submit all contracts as Freddie Mac wants?  For me, that's a resounding NO.  I bring my offers to the seller and the seller picks ONE if I'm LUCKY enough to have a multiple contract situation.  Until I have fully exhausted my efforts on that first contract, ONLY THEN will I move onto the SELLER'S next choice.

 

DON'T promise a homeowner you can "SAVE" them or their house.

DON'T take upfront fees (although my understanding is you will not be prosecuted for this now)

DON'T falsify a THING!  KEEP RECORDS.

 

It's unbelievable the amount of paperwork we have to deal with on these now and lenders are making it HARDER not easier to work through the short sale process because they want to MAXIMIZE their losses and in my opinion the only thing we can do is really keep a stiff upper lip and bare it.

 

 

 

 

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Permalink Reply by Richard on August 29, 2011 at 9:49am

Holly,

 

I'm just guessing but, that sounds like a very good posting question in itself, especially since you're so close to approval.  I'm sure you'll generate some interest.  Thanks for joining in........I'm learning alot from you pros.

 

Rich

 

Holly wrote:

 

How do you disclose that the seller and their real estate agent are brother/sister?  Do you need to do it in writing?  I have this situation with a CitiMortgage - where it wasn't until the package was submitted that the real estate agent let it slip that seller was his sister?  What should I do at this point?  He is the broker and it is his agency -so is just changing the listing agent enough?  We are hopefully getting close to approval time - but I feel that this situation needs to be addressed before an approval letter...Help??

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Permalink Reply by Jeff Payne on August 29, 2011 at 10:19am

Richard, most of what you hear are just stories and not much truth to it.  There are always scammers in everything but for the most part it would be difficult to scam a lender on a short sale, especially when the lender makes the determination if the offer is good enough by hiring someone to do an appraisal for them.

I agree with Smitty above.  The only problem is that perception is reality for Fannie and Freddie and they percieve that fraud is being committed. 

Richard said:

Hi again Eric,

 

This article is very similar in nature to the article published earlier this week.  Having family members working in this industry and being a buyer myself, short sales have plenty of shady stories here in Arizona.  It is ashame that many agents and buyers work hard and fair by the rules and, then only to come up short to someone that don't care about legality.  As a buyer and citizen, I am all for stopping this fraud. 

Start giving out felonies, seizing assets, issuing orange suits, jail time and jail cells!!

• ▶ Reply

Permalink Reply by Richard on August 29, 2011 at 10:52am

Thanks Jeff and Smitty.........that's good to know.  You know....when most crisis such as the slump in economy hits, we tend to learn a lot rather quickly through trial and error.  And, there will always be some to take advantage of others.  But, personally, I'm hoping the industry, with the help of knowledgeable agents will improve and continue to police itself.  As most have been saying, there are a ton of homes to be sold.  Thanks again!

 

Rich 

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Permalink Reply by Smitty on August 29, 2011 at 1:34pm

Holly, it depends on who the lender is too if it's a big deal.  I know for sure that BOA will have an issue with it.  Each servicer is different and for some it may not be an issue, but it's usually addressed in the arms length transaction form which, not all lenders have.  I guess to be safe, if you're going to go that route, you can write right into the listing agreement, "Seller and agent are related" and see what happens, but honestly it's getting SO ridiculous that I really feel that the owner should have had another AGENCY list it...not even another agent.  I've had BOA scrutinize a buyer who was a broker and wanted to keep things arms length so he had another agent list the property.  It wasn't arms length enough as the listing agent was in his company.  It killed the deal.  Thankfully he was able to get another buyer, but seriously...how far is it going to go? The guy was TRYING to do the right thing and it was STILL wrong.  LOL....thankfully we all know better know but with BOA and some of the other big servicers, expect it to be an issue.

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