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Good Guys / Bad Guys, Who’s Who in Mortgage Fraud

Course Syllabus

Mortgage fraud occurs when false statements are made to qualify for a loan. There are a number of practices contributing to loan fraud. This course will provide the real estate professional with an overview of mortgage fraud, a new awareness, what to look for and how it can be prevented.

The benefit to the consumer when a licensee has successfully completed this course is that the agent will be know what encompasses predatory lending practices and how to identify potential customers, scams and techniques of predatory lending and mortgage fraud as well as evaluate the various avenues and possible choices available to a distressed homeowner.

Upon completion of this course you will be able to:

  • Describe those actions encompassing predatory lending practices
  • Identify the potential customers, scams and techniques of predatory lending and mortgage fraud
  • Describe various techniques used by predatory lenders
  • Elaborate on ways to protect the client/consumer from predatory lenders by identifying techniques
  • Recognize how fraud groups work together to perpetrate mortgage fraud and predatory lending practices
  • Describe how scammers use this form of short sale fraud to conduct a short sale and then flip the property
  • Identify ways that scammers utilize the bankruptcy provision that delays foreclosure
  • Review and discuss the role of straw buyers, unrecorded second mortgages and the technique of shell corporations
  • Demonstrate an ability to identify fraud schemes
  • Illustrate knowledge of how dishonest appraisers and attorneys can manipulate using various techniques
  • Discuss cases focused on the operations of groups involved in fraudulent mortgage activities
  • Explain how Real estate agents can use the information in this course to take precautions to avoid mortgage fraud
  • Recognize and describe predatory ‘rescue’ scams
  • Evaluate the various avenues and possible choices available to a distressed homeowner
  • Express a depth of knowledge regarding short sales and how to guide the consumer to legitimate sources of assistance
  • List and discuss additional choices to assist the distressed homeowner

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Content sample from the course

Unit 3

Mortgage Fraud Overview

More schemes to defraud
•    false money for straw buyers
•    investors get the shaft
•    fake leases to qualify buyer
•    all parties share money
•    attorneys launder flip money
•    appraiser leaves out sale
•    appraiser uses bad comparables
•    close without attorney or buyer
•    all flip the same neighborhood

False money for straw buyers
In this scam, bank employees are paid to issue fake cashier’s checks, which are then presented as deposits or down payments by straw buyers. Straw buyers may also use fake gift letters.
Often, when a legitimate buyer is short of down payment or closing costs, a parent or grandparent comes up with the needed cash. In order that the money will not show up as one of the borrower’s future debts, the lender is told that the money is a gift and no repayment is anticipated. This may or may not be true. In some cases, the lender requests proof that the grandparent actually has the cash available for the gift. False gift letters are also used by straw buyers in some cases.

Where no lie is involved, the practice is legal.

Jane Doe finds the house of her dreams but doesn’t have a sufficient down payment. She has a well-paying, stable job and can otherwise afford to purchase the property. Jane’s buyer’s agent suggests to Jane and the seller that the price of the house be increased by $25,000 and that the seller take a note for this amount. The plan is for the note to be torn up after closing. By doing this, Jane is able to effectively include the amount of the down payment into her mortgage. Does this constitute mortgage fraud?  Yes
Jane will be providing false information to her lender in order to procure mortgage financing. Moreover, the mortgage will be underwritten not based on the true, selling price of the property but instead on an artificially inflated price. At the time of closing, Jane has no equity of her own in the property which would also normally affect whether or not the loan was approved.

Doing it wrong
Every loan has a maximum seller contribution. An agent wrote a contract and put in the maximum seller contribution. The selling price was $200,000. $12,000 is shown as the seller contribution, but the buyer needed more money and the six percent won’t cover everything in the home the buyer is going to purchase.
What to do? One thing is to increase the price and then have the seller pay more money. If the seller can’t contribute any more – what do they do? After closing, the seller pays the buyer, making it a gift. This gift is illegal.
Where does the buyer get a check for closing? The member of the fraud ring who works at the bank draws up a false cashier’s check or they make one up on their computer.