How Real Estate Agents Can Avoid Being Caught Up In A Loan Fraud Scam!

If it sounds too good to be true, it probably is. Any scenario in which a buyer is told he can pay nothing down, buy a second home, and a renter will cover the mortgage payment, is suspect.

Property flips. A flip occurs when a house is purchased for a lower price and then quickly sold for a substantial profit.A flip can be legal and a sign of a wise investment - it can also be loan fraud under certain circumstances.Be on the lookout for back-to-back closings, “sellers” who never actually take title to the property, or false information being provided to the lender. Remember that effective June, 2003; HUD’s new rule regarding “flipping” makes properties ineligible for FHA mortgage insurance if the resale date is not more than 90 days from the date of acquisition by the seller.

Large assignment fees or second mortgage payoffs shown on the closing statement. If you are a listing agent in the transaction, you should know how many mortgages your seller has on the property and about how much it would take to pay them off. If your seller only told you about his first mortgage, why is a payoff for a second showing up?Don’t be afraid to ask questions - who is receiving this assignment fee, and why?What is it that is being assigned?

Real estate commissions based on a sales amount that is less than the purchase price shown on the closing statement. If the closing statement shows a purchase price of $300,000, the seller isn’t paying a commission on that amount when he is only going to receive $200,000 from the sale.Why are you, as the agent, getting a commission based on an amount that is less than the purchase price?

Any scenario that contemplates an exchange of funds connected to the closing but handled outside the closing and not shown on the closing statement.If the lender won’t permit it to be shown on the HUD-1, having the exchange of funds occur outside closing may constitute loan fraud.This includes additional fees or other funds paid to real estate agents, appraisers, parties to the transaction, and third parties.

Contract prices not supported by other comparable sales.If you’ve done your homework for your client, you know what similar houses in the same neighborhood are selling for - if the price on a property is out of line, find out why.