California Real Estate Fraud Report

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Homeowners Resort to Fraud to Bail Out of Mortgages

Although this blog is dedicated to fraud committed by licensed real estate professionals, homeowners are jumping onto the fraud bandwagon with deliberately misleading loan applications and short sale schemes.

In order to put a stop to “buy and bail,” Fannie Mae, the giant government-sponsored enterprise that buys and guarantee mortgages, began enforcing new guidelines that require borrowers with a current mortgage to have 30% equity in that home before buying a second home. This prevents the wily borrower from benefiting from the fall in home prices and walking away from the first mortgage, for which the loan is often more than the value. Freddie Mac and the Federal Housing Administration (FHA) are expected to implement similar restrictions.

The short sale scam occurs when the borrower arranges to lower his or her monthly payments by finding a “buyer” who is a friend or relative to purchase the property short and then later agrees to transfer the property back to the original borrower.

Although the original borrower has clearly committed fraud – sometimes with the knowledgeable assistance of his real estate agent – lenders have been perplexingly lax in pursuing criminal penalties against both parties.

Read this fascinating and well-researched Article by Leslie Berkman in The Press Enterprise.

© Copyright 2007-2017 Monique Bryher

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The information and notices contained on The California Real Estate Fraud Report are intended to summarize recent developments in real estate fraud, mortgage fraud, short sale fraud, REO fraud, appraisal fraud, loan modification scams, loan modification fraud and other real estate related crimes occurring in Los Angeles and California. The posts on this site are presented as general research and information and are expressly not intended, and should not be regarded, as legal advice. Much of the information on this site concerns allegations made in civil lawsuits and in criminal indictments. All persons are presumed innocent until convicted of a crime. Readers who have particular questions about real estate fraud, mortgage fraud and appraisal fraud matters or who believe they require legal counsel should seek the advice of an attorney.

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