Short-Sale Fraud #1

Over the next few weeks, I will share with you some of the latest frauds that are going on in the marketplace. Fraudsters are coming up with new frauds every day because the old frauds are being detected fairly easily. An amazing fact is that the FBI has investigated over 2,700 Mortgage Fraud cases in 2009, but has investigated over 3,000 in only the first four months of 2010! (Source: FBI 2009 Mortgage Fraud Report Year in Review).

Let's look at one of the schemes that is currently out there:

This scheme is a short-sale scheme:
1. The fraudster recruits a straw buyer to purchase a home for the purpose of defaulting on the mortgage.
2. This straw buyer secures a mortgage using false documentation and information.
3. Once the transaction is complete, the buyer stops making payments on the mortgage, causing it to default.
4. Prior to a foreclosure sale, the fraudster (not the buyer) offers to purchase the property from the lender through a short-sale.
5. The lender accepts this offer, not realizing that the short sale was premeditated.

What can you do to prevent becoming involved in something like this?
1. Use lenders you know and trust.
2. Research the chain of sales on each property you list.
3. If you think something is fishy, talk to the agents that were involved in the previous sales.
4. Know what your buyers can truly afford.
5. Go into every transaction with your eyes open: if it is too good to be true, it probably is.

Stay tuned next week for a builder scheme.

I'd love to hear what you think of this one!