Banks Now Promoting Mortgage Fraud

By
Services for Real Estate Pros with Marte Cliff Copywriting

Mortgage fraud is on the Upswing, but not from the usual sources...

Wouldn’t you think that with all the uproar over mishandled foreclosures the banks would be trying to follow the letter of the law? At least with regard to loans, if not with handling offers on REO properties.

 

While doing research for a copywriting client the other day, I came across a short blurb saying mortgage fraud is on the upswing. So I decided to find out more.

Since banks are demanding stricter documentation these days, and since appraisers are being super careful lately, I didn’t think they were talking about “liar loans,” but I had to see.

It turns out, they were talking about short sales, and banks that hold second mortgages.

cashBecause the bank that holds the first mortgage gets to decide how many dollars that second lien holder will receive from the sale, those second lien holders are attempting to extort a few extra dollars illegally.

They do have the power to refuse to release their lien so the short sale can close. And they’re using that power to demand “under the table” payment. Often they don’t care if it’s the seller, the buyer, or the real estate agent who pays them. What’s important is that it doesn’t show up on the HUD-1.

They don’t want the first lien holder to know they’re getting the money.

Of course it’s illegal. And of course real estate agents who participate could lose their licenses. But that’s not the bank's concern. They just want the money.

How did we get to a point where banks are above the law?

 

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Ambassador
2,034,642
Todd Clark
Keller Williams Realty - Beaverton, OR
Broker - Beaverton, Oregon Real Estate Expert - (503) 524-9494

We had a bank tell us the other day they needed so much money and when we told them what they were proposing was illegal, they said "We didn't say that, we don't want any one to do anything illegal, we just said it can't be on the HUD" WHAT?




Jun 25, 2011 11:45 AM #8
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Todd - Sounds like that bank just doesn't understand legal and illegal. Did you set them straight?

Jun 25, 2011 12:01 PM #9
Ambassador
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Patricia Kennedy
Evers & Company Real Estate, Inc. - Washington, DC
For Your Home in the Capital

Hey, Marte!  I included this post in Last Week's Favorites.

Jun 26, 2011 09:52 AM #10
Rainmaker
392,074
Tni LeBlanc
Mint Properties, Tni LeBlanc (805) 878-9879 - Santa Maria, CA
JD, MA, REALTOR, CalBRE # 01871795

Yes, they have been trying this stuff for many years.  

I honestly think that the banks should be prosecuted for this type of behavior.  It is ridiculous.  I have seen less and less of requests for it lately, but maybe because it has come out from under the rug.  Great blog!

Jun 26, 2011 11:26 AM #11
Rainmaker
570,044
Bill Gillhespy
16 Sunview Blvd - Fort Myers Beach, FL
Fort Myers Beach Realtor, Fort Myers Beach Agent - Homes & Condos

Hi Marte,  I just heard of something very similar to your post.  They wanted the money to be paid under the table or with a post dated check but definately off the HUD -1.  Our agent refused and asked the other agent why they would even ask !?!?!

Jun 26, 2011 12:05 PM #12
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Wow - thanks Patricia!

Tni - Thanks. I think so too - but who would do it? Our "authorities" seem to be giving banks a free pass on anything and everything. An agent would have to be pretty outraged to try to do anything about it - think of the time they'd lose from work.

Bill - I think it would be easy for a new or inexperienced agent to get sucked in, thinking that the bank is in  the position of authority - so if they propose something it must be OK.

 

Jun 26, 2011 12:59 PM #13
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Erica Ramus
Erica Ramus - Ramus Realty Group - Pottsville, PA - Pottsville, PA
MRE, Schuylkill County PA Real Estate

Hi Marte. I've heard of agents being asked to do things like this, and the banks saying unless the agent agreed to it they wouldn't sign off. 

Jun 26, 2011 01:37 PM #14
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Erica - Yes, they hold the transaction hostage. It's pretty stupid, since they lose it all if the buyer, seller, and agents call their bluff.

Jun 26, 2011 01:42 PM #15
Rainmaker
313,710
Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Yes, when I was young and naive, I used to think that banks and the government always had the best intentions for all. Then I grew up.

Jun 26, 2011 02:37 PM #16
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Sandi - We've all had to grow up real fast in regard to trusting banks and the government. Now we've got a mess to deal with and who knows where to start?

Jun 26, 2011 04:53 PM #17
Rainer
159,536
Ray Waisler
Evolve Bank & Trust-Atlanta, GA Lending Nationwide - Atlanta, GA
NMLS #6621 - Specializing in Jumbo FHA & VA

Marte, I'm actually amazed that you sound shocked by this. Nothing the bank do can ever surprise me again as we've seen them for what they are.

Jun 26, 2011 09:49 PM #18
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Ray - I don't know why I sound shocked. I'm not - I'm disgusted, and dismayed because I don't see an end to it.

I really wrote this in hopes that young new agents would see it and not be sucked in. If either a buyer or seller got mad, I think it could mean big trouble for an agent, even while the bank got off scott free.

Jun 27, 2011 01:56 AM #19
Rainmaker
1,264,048
Gene Riemenschneider
Home Point Real Estate - Brentwood, CA
Turning Houses into Homes

The banks have a financial interest in all these Appraisal companies too - that is not supposed to be legal either.

Jun 28, 2011 04:28 PM #20
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Gene - It definitely shouldn't be legal.

Did you catch my other mortgage fraud post, about real estate agents and investors? Judging from Chris Ann's comment, that one could also go deeper - involving asset managers at banks.

Jun 28, 2011 04:39 PM #21
Ambassador
294,126
Linda K. Mayer
License # 01767321 - La Verne, CA
Realtor, SRES, SoCAL, A REALTOR YOU CAN TRUST

Marte, to answer your question: We got to where the banks were above the law when the government got involved!

Jun 28, 2011 05:18 PM #22
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Linda - Yes, that makes sense. Since our politicians and others in government positions are also above the law.

It does tickle me when one of them steps so far out of line that the courts are forced to punish them. Not that I want them to continue criminal behavior, but that I want somebody with enough power to step up and say "You can't do that."

Jun 28, 2011 05:36 PM #23
Anonymous
Anonymous
Paul

After waiting as a buyer for 11 months, the final and best solution, the so called seller's short sale expert came up with was an under the table payment to a sceond lien holder. At points things were not handled in the best way by the seller and seller's agent, but we were patient and accepted that it could take over a year to take possesion of the property. We were simply incredulous, when the final solution of so many months involved mortgage fraud. The feeling we recieved, is that we are not going along with the way things are comonly done, and we just must not want the property. We love the place, but I educated myself, and in no way want to be involved in an illegal transaction. My wife and I are very patient and introspective people, but this is enough to be infuriating for anyone.

 

May question is this. If this agent has closed many sales. Is he ignorant or unethical if he does not realize the magnitude of the fraud proposed?

Jul 20, 2012 07:01 AM #24
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Paul - My opinion would be that the agent is just unethical enough to stick his head in the sand and say "If the bank says it's OK, then it's OK."

In other words, he doesn't want to look at the magnitude of the fraud.

Jul 20, 2012 09:07 AM #25
Anonymous
Anonymous
Paul

Thank you very much for the response. It is suprising what people can convince themselves of when money is involved. Slowly and surely this will become a better process. Thank you for bringing attention to this issue.

Jul 20, 2012 10:25 AM #26
Rainmaker
824,238
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
your real estate writer

Paul - The banks are good at "illegal" as we've seen through the robo-signing scandal. And that's just the tip of it. They're foreclosing on people without even knowing who owns the note. They forge signatures when it suits them, too.

But it's not new. They feel they're above the law - or it doesn't apply to them. When I was an agent I handled bank owned properties and they absolutely refused to follow state law with regard to offers.

I'd like to think it will all get better, but I'm not at all convinced that they're even trying to make it better.

Jul 20, 2012 11:18 AM #27
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