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Short Sales and Mortgage Fraud a VIEW FROM THE REALTOR

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Presented by: Kathy Mehringer CRB, SFR SFR Instructor California Association of REALTORS Director for Life * What is Short Sale Fraud? The misrepresentation or ... – PowerPoint PPT presentation

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Title: Short Sales and Mortgage Fraud a VIEW FROM THE REALTOR


1
Short Sales and Mortgage Fraud a VIEW FROM THE
REALTOR PERSPECTIVE
  •  
  • Presented by
  • Kathy Mehringer CRB, SFR
  • SFR Instructor
  • California Association of REALTORS
  • Director for Life

2
What is Short Sale Fraud?
  • The misrepresentation or omission of material
    facts designed to induce a Servicer / Lender to
    agree to agree to the sale of a property
  • At a price, terms and/or conditions which would
    not have been agreed to had the true facts been
    known
  • What does fraud look like
  • Property Flopping / Flipping
  • Non-Arms Length Transactions
  • Non-disclosure of dual agency representation by
    broker
  • Misleading lender / servicer as to distribution
    of commission and/or other payouts
  •  

3
What is Short Sale Fraud?
  • Falsification, manipulation AND/OR multiplication
    of HUD1 Settlement Statement(s)
  • Abuse of the Multiple Listing System (MLS)
  • What / When / Where
  • Fair Market Value maneuvering
  • BPO
  • Abuse of MLS data
  • Reverse staging

4
Prevent Mortgage Fraud Recognize Red Flags
  • Another Definition of Fraud
  • Deceit
  • Trickery
  • With intent to profit
  • Recognize the Red Flag
  • If it sounds too good to be true..
  • Trust me its perfectly legal.
  • I can give you the secret to multiple
    commissions
  • DONT JUST SAY NO SAY HECK NO!

5
Scams and Schemes
  • We are all part of the solution!
  • Honest Realtors
  • Broker defense lawyers
  • Risk management advisors
  • Brokers and managers
  • Real estate trade organizations
  • Law enforcement agencies
  • Buyers and sellers
  • Lien holders and servicers
  • Settlement Service Providers

6
Scams and Schemes
  • Recognize Its easy
  • Be alert and pay attention
  • Reject Not hard when you understand the
    consequence
  • Just say NO
  • Report Take the time to do the right thing
  • Walk the walk dont just talk the talk

7
Scams and Schemes
Cash for homeowners Only to you will my
secrets revealed!
Investors Flip em and Flop em I can show you
how
Real Estate Licensees Earn three commissions on
every short sale
8
Arms Length Affidavits
  • Require borrower(s) and buyer(s) signatures
  • AND
  • Listing agent and buyers agent signatures
  • AND
  • Are signed under penalty of perjury
  • AND
  • Ought to be read carefully before signing

9
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13
The Devil Is In The Details
  • Distressed Homeowner
  • In Default OR Danger of Imminent Default

14
Mortgage or Loan(s) More
  • Some Scams Schemes
  • Seller persuaded to Transfer into a trust w/
    beneficial interest to interested party Stop
    making payments OR Pay to Con Man
  • Power of Attorney
  • Short Sale Negotiator is Buyer or works for Buyer
  • Deed transfer, quit claim, multiple bankruptcy
    filings
  • Quick Sale below FMV for the flip
  • Falsify MLS info, bogus offers, fake photos,
    listing agent freezes out offers in order to self
    sell mulitiple HUD-1s
  • LLC Buyer, reverse staging, bogus liens, bogus
    repairs
  • Settlement service provider in pocket
    manipulates HUD-1 outside escrow payouts
  • Pre-determined buyer - double escrow to retail
    buyer A-B-C
  • Close Escrow Jail time

15
Current Fair Market Value Less
  • Legitimate Real Estate Representation
  • Open to market and Public Brokers
  • Present all offers to seller
  • Secure highest price with best terms from a
    legitimate qualified buyer
  • Best offer to short sale lender
  • Disclose all material facts, addenda, agreements
  • HUD settlement lender approval letter match
  • No money changes hands without consent of short
    sale lender
  • Adhere to Arms Length Affidavit
  • No money transfers outside of escrow
  • Close Escrow and complete short sale

16
Just When You Think You Have Seen it All
17
Red Flags
  • Listing agent (individual) also represents buyer
  • Dual Agency IS NOT necessarily problematic as
    long as offer is legitimate
  • No counter offers negotiated with purchase
    contract
  • MLS data entered the same day as the sale
  • Listing agent unable / unwilling to provide
    market activity verification
  • Specific escrow company as a condition of sale
  • Off Brand
  • Offers from LLC
  • Multiple Offers in queue from other LLCs
  • Teasing the Lender

18
6612 Preventative Measures
  • Property Inspections
  • Independent Licensed Certified Appraisals
  • Preliminary Title Reports
  • Review contracts for added language
  • Im robbing you but Im telling you
  • Buyer intends to resell at a profit
  • Controls on LLC transactions
  • Cash purchases / verify funds upfront

19
12 Preventative Measures
  • Pre-Approval letters / legitimate source
  • Third Party Short Sale Negotiators
  • Implement Exclusionary List
  • Minimum MLS marketing time
  • a. In the relevant MLS
  • Require Market Activity Report
  • Require both Buyer and Seller side of HUD-1
    Settlement Statement
  • Why would a Buyer agree to pay off liens, debts,
    short sale negotiator or any additional fees?
  • Because the house is being sold at a price well
    below fair market value, right?

20
Enforcement Efforts are Underway
21
Fraudulent Short Sale Approval Letters
  • http//www.fbi.gov/losangeles/press-releases/2012/
    three-arrested-in-los-angeles-and-orange-county-fo
    r-fraud-involving-short-sale-real-estate-transacti
    ons?utm_campaignemail-Immediateutm_mediumemail
    utm_sourcefbi-in-the-newsutm_content106751
  • U.S. Attorneys Office June 15, 2012 three
    arrested in Los Angeles and Orange County for
    Fraud Involving Short Sale Real Estate
    Transactions
  • Alleging they defrauded homeowners, financial
    institutions, and real estate investors in
    schemes that targeted the distressed homeowner
    market and allegedly caused more than 10 million
    in losses,
  • According to court documents, the defendants used
    a variety of schemes, at least two of which
    centered on fraudulent short sale approval
    letters purportedly issued by a bank.
  • Many of the properties utilized in the schemes
    were distressed homes. In some cases, the
    defendants claimed to have insiders working at
    the bank who, in exchange for cash, would
    authorize short sales for far less than the fair
    market value. This allowed the defendants to
    flip the house for a significant profit.

22
Federal Bureau of Investigation
  • http//www.fbi.gov/losangeles/press-releases/2014/
    real-estate-professional-pleads-guilty-to-federal-
    bank-fraud-charges-for-illegally-flipping-central-
    coast-residential-properties
  • San Luis Obispo real estate broker pleads guilty
    to a short sale flipping scheme
  • He purchased homes at artificially low prices and
    resold them at a profit
  • Between January of 2010 and September of 2012 the
    broker admitted that he made false
    representations about the fair market value of
    the short sales he was purchasing
  • While negotiating the short sale at a lower price
    he simultaneously was negotiating the flip at a
    much higher price
  • Profiting in excess of 500,000.00
  • The Judge will impose the sentence in June of
    2014

23
Question and Answer Time
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