Mortgage Fraud Series #5

I’m writing a few posts to help Bradenton, Florida homeowners become aware of mortgage fraud schemes perpetrated in our area. As  a professional Realtor, I hear a lot of stories of how homeowners unwittingly became involved in fraud investigations.

Here’s an example…

The mortgage broker called me and said he had a solution which would mean we could close a troubled transaction.  The buyer’s qualifications were weak and he just couldn’t qualify for the program without coming up with $14,000 down payment. 

The mortgage broker says, “What we’ll do is raise the sale price $14,000 on the settlement statement.”

I said, “How will that solve the problem?  All that means is that the Seller will get an extra $14,000.”

I knew what he was getting at, but he hemmed and hawed. I continued, “How will that $14,000 get to the buyer to help him close?”

The mortgage broker said, “The Seller will give him the $14,000 outside of closing and it will show on the settlement statement like the Buyer brought it in.”

My response was, “That’s mortgage fraud and I won’t have anything to do with it.”

The Single-Sided Flip

Here’s the scenario: The seller enters into a contract to sell property for an inflated price, possibly tens of thousands to hundreds of thousands of dollars above the seller’s asking price.  The seller is told they will net their original asking price through one of several mechanisms:

1. The seller will pay the buyer the difference outside of closing.  “After all, it’s the seller’s money why can’t they give it to anyone they want?”
2. The seller’s proceeds will be reduced by one or more bogus payments reflected on the settlement statement.  The payments are often for fake unrecorded mortgages or remodeling contractors who have never worked on the property.  The payments are made to entities owned by the buyer or a “facilitator” of the transaction.
3. A “secret second” mortgage back to the seller that is forgiven within days of the closing.

In the Single-sided flip the buyer’s down payment is funded by one of above mechanisms. The fraud occurs when the lender is unaware of the true consideration for the property.  The single sided flip is resulting in prosecution of all parties to the transaction, including the seller who received no money above their original asking price.  The buyer may be an individual with good credit promised large profits and immediate cash back.

Feel free to leave a comment.

(Copyright © 2007 By Dan Forbes, All Rights Reserved.)

Please contact me, Dan Forbes, a call if you have questions about or our Bradenton, Florida real estate market at 941-746-0505; toll free 877-646-8326.  Visit my web site BradentonFloridaRealEstate.com

This entry was posted on Friday, November 2nd, 2007 at 3:55 pm and is filed under Mortgage Fraud. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.