[Ask DC- Question of The Day] Fraud ... - Real Estate Investing

Hey D.C. Here,

I got this question from Alex other day:

?Hey DC, I was reading on Fannie Mae?s Website about fraud
and their characteristics. What does it all mean??

My reply:

Alex, I have read that article as well.? You have to
understand that these characteristics are only indicators of
a potential scheme.? We are going to go over Property Flip
Characteristics and Short Sale Fraud Characteristics.

Property Flip Characteristics are when illegal property
flipping occurs when a property is purchased and resold
quickly at an artificially inflated price, utilizing a
fraudulent inflated appraisal.

Property flips typically involve straw buyer(s) and
sometimes involves na?ve purchasers.? The seller has very
recently acquired title or is acquiring title concurrent
with the subject transaction.? There typically is no real
estate agent employed, which makes this a non arms length
transaction.? Property was recently in foreclosure or
acquired at REO sale at a much lower sale price.

In a property flip situation, the appraised value is
fraudulently inflated.? The appraiser will frequently use
other property flips as a comparable.? The owner listed on
the appraisal and or/title may not match the seller on the
sales contract.? A refinance transaction is utilized to
payoff private short term financing.

Straw buyers are loan applicants used by fraud perpetrators
to obtain mortgage and are used to disguise the true buyer
or the true nature of the transaction.? In this case, there
is a mortgage loan on the property and the payments are made
by an entity other than the borrower.

At times, the loss mitigation department will require you to
obtain an appraisal.? This appraisal needs to be in your
name as you are the investor who is purchasing the property.
The appraisal will show what the home is truly worth at
market value.? We do not influence the appraisal in anyway.

A transaction that is done properly involves a realtor and
that realtor is an independent third party. Since I have
transactional funding available to you, you do not have to
qualify for the loan.? The transactional funding is paid off
with the proceeds of the sale, when you resell the property.

Short Sale Fraud is where the perpetrator profit*s by
concealing parties to the transaction and/or contingent
transactions or falsifying material information including
the true value of the property so the servicer/lender cannot
make an informed short sale decision.

This is where there is a sudden default, no workout
discussions and an immediate offer at the short sale price.
The homeowner has conflicting reasons for default and the
mortgage delinquency is inconsistent with the borrowers
spending and credit patterns.? The offer on the property is
from a related party and the offer is less than current
market.

Many times the homeowner will get cash back at closing or
other disbursements that have not been disclosed or approved
to the servicer/lender.? The buyer and real estate agent may
be the same person or related parties.

The key is disclosure.? All parties, including the short
sale lender/servicers need to know what kind of transaction
this is.? Full disclosure must be made.? In a short sale,
the seller is to walk away from the transaction without any
proceeds.? If the seller obtains money from the closing,
then the transaction is fraud.

The buyer and the real estate agent cannot be the same
person.? This does not make this transaction arms length.
Lenders/servicers are doing background searches and if they
are related, then the files are denied.

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Talk Soon and enjoy your weekend,

DC

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Related Real Estate Investing posts:

1. [Ask DC- Question of The Day] Fraud Schemes and Characteristics: Part 2
2. What is a Short sale and is it considered Fraud? ? Ask DC Fawcett
3. Bank Of America Mortgage Fraud:Hacker Leaks Evidence of Alleged Fraud by BofA
4. Mortgage Fraud:Distressed Sales & Federal Programs Drive 20% Jump in Mortgage Fraud
5. Arms Length Transactions ? Ask DC

Source: http://www.realestateforeclosuresinvesting.com/ask-dc-question-of-the-day-fraud-schemes-and-characteristics-part-1/?utm_source=rss&utm_medium=rss&utm_campaign=ask-dc-question-of-the-day-fraud-schemes-and-characteristics-part-1

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