California Real Estate Fraud Report

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NAR Gets HUD to Pull the Plug on Forbidding Dual Agency on Short Sales

In what can only be viewed as a victory for the National Association of Realtors (NAR), the U.S. Department of Housing and Urban Development (HUD) has rolled over on a policy that would have quashed dual agency on FHA short sales beginning October 1.

Dual agency occurs when the same brokerage (not necessarily the same agent) is representing both the buyer and seller in a real estate transaction. While legal in California, dual agency is prohibited in a number of other states.

Honest, competent agents can and do complete real estate transactions, faithfully representing both sides in a residential property sale and to the satisfaction of both.

Short sales are another and very different story. In my own observations and that of other honest real estate agents, dual agency is the mother’s milk of fraud that often drives successful short sale frauds. An examination of under-market value short sales on any Multiple Listing Service (MLS), at least in California, reveals more than the standard number of escrows being closed are dual agency.

HUD had sent a letter to mortgage servicers in July, outlining anti-fraud measures designed to prevent non-arm’s-length short sales. In these “special” short sales, the borrower often does not move out of his/her home and effectively gets a generous write-down of his/her principal mortgage and any junior liens. My term for this is “mortgage laundering,” which is discussed in depth in my ebook “How to Commit Short Sale Fraud . . . and Get Away with It.” Further, the borrower does not have to pay what would normally be gains on the sale to the Internal Revenue Service and of course, the property taxes are often reduced drastically; both of which are tax evasion, in my opinion.

What remains unspoken by all the above-named parties is that short sale fraud is epidemic, is obviously highly profitable and all levels of government are content to prosecute far less than even 1% of the borrowers, real estate agents and brokerages that engage in it.

When it comes to short sale fraud, crime pays and it pays very well.

Read the original article in Inman News.

© 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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