California Association of REALTORS; CAR has notified REALTORS of tactics that some lenders are using to extort 'additional' payments outside of escrow in order to release liens and approve short sales. I received this email today:
|
 UNDISCLOSED SHORT SALE PAYMENTS MAY BE ILLEGAL
Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws. Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lienholders and others, oftentimes outside of escrow.
One common scenario is when a short sale seller's senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow. Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500). Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent's participation in the scheme may be subject to license revocation by the Department of Real Estate or other disciplinary action.
Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:
|
|
|
In one of my deals the collection agency that purchased the 2nd has requested the seller "send a payment to reduce the principal balance" and this will induce the company to accept the payoff on the HUD allowed by the first mortgage holder and release the lien to allow the short sale transaction to be completed.
I first thought that extortion seemed like a really harsh word, however, I want to disclose that I looked up "extortion" and in my opinion I feel like this is the best description of what these lenders are doing.. What do you think??
So the (not so) funny thing is that the lender as the first mortgage holder is the 'victim' of loan fraud being a "Federally Insured Senior Lender", and in the very next transaction they could very well be the perpetrator of the fraud against some other "senior lender". Now if only we could get the government to forbid the 2nd mortgage holders from selling to credit collection agencies...
Deb Espinoza GRI, ABR, ePro, SFR, CNE
Stage Presence Homes
StagePresenceHomes.com
DebSDRealEstatePro@gmail.com
