Mar. 8, 2008 - Would You Do Mortgage Fraud?
You see a house advertised. You call the listing agent.*
The listing agent asks:
"Are you working with a Realtor? "
You say "no."
The listing agent asks:
"Have you been pre-approved for a mortgage."
You have not talked to a lender but you've done some on-line pre-qualification thingies (thingies is a highly technical mortgage term there is nothing inherently wrong with these mortgage thingies) and you know you can afford a house for... let's say $150,000 based on your income and your debt.
You and the agent schedule the appointment. You fully understand the agency relationships in the transaction whether the agent is working for you, or working for the seller or both (disclosed dual agency ) and thus neither you nor the seller... agency... that's a whole 'nuther blog for another day...
You see the house. You love the house You make an offer, the house is priced at $158,000 but you you hope that seller will accept your offer of $150,000 because that's what the on-line thingies told you, you could afford. You know the house is overpriced. The seller accepts the offer.
You go to a lender. The lender says "oops" You can't afford it. "You need to ask the seller to raise the price and build in your closing costs (points, the down payment on certain programs ams...)
You go back to the listing agent and say ...
"We need to rewrite the contract with the seller, raise the price to lets say.... $154,500.00."
I am not even going to go on with the scenario from there. Whether the agent goes along. Whether the seller goes along.... whether the property appraises. Whether the loan closes. Whether....
This entry was inspired by two ActiveRain posts from Larry Morris a mortgage professional in in Newburg Oregon.
Are you Committing Fraud with Seller Paid Concessions?
Are you Committing Fraud with Seller Paid Concessions? part 2
Larry's posts and the zillions of comments on it ... mostly from people in the real estate industry show how hard it is for real estate agents, loan officers and buyers and sellers to see when they have crossed the line from getting the deal together to mortgage fraud. Good clean fun.... Right? No one gets hurt? The seller gets their home sold. The buyer becomes a home owner... the agent and loan officer get paid for their work... ?
Who is being defrauded? The secondary mortgage market. It is a complex issue. If you wrote the offer up originally to include a seller concession it is OK. If you rewrite the offer... renegotiate the terms of the offer with the seller....
* It does not necessarily even need to be the listing agent on a property... it just is in my scenario... it could be another agent, it could be your buyers agent if they have not made sure you are really, really qualified for the offer you are making to the seller. It was just the listing agent in this scenario...
Is the moral of this story just automatically ask for concessions on any offer? No, not really the moral is get pre-approved by a good lender... I have links to good lenders on my website mortgage page on MaureenMcCabe.com (link is in the sidebar here.)
I'd love to hear from you if you have a comment on the topic of mortgage finance, mortgage fraud, pre approval, etc. All comments are moderated so you will not see your comment immediately. Thanks. Copyright 2008 Discover Columbus and Maureen McCabe
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