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By eric p. early, managing partner,
and Scott e. gizer, operations partner
early Sullivan Wright gizer & Mcrae LLp
Fighting Fraud with Due Diligence
Familiarize yourself with real estate schemes and scams
Criminals will always find ways to take advantage of unsuspecting victims, but crime itself is evolving constantly. In today’s economic
climate, more criminals are hatching
intricate escrow-fraud schemes to
bilk innocent people out of equity and
other finances.
as such, mortgage professionals
need to be diligent about protecting
themselves and their clients. although
crime can come in different forms and
approaches, it’s a good idea for mortgage professionals to familiarize themselves with a few of the common ways
that criminals direct their efforts at the
housing industry.
homeowners about short-selling their
property. The scammer would then
have the real estate agent get the listing, advertise the property as a short
sale and then even contact a lender
to start the short-sale process. From
there, consider the following sequence
of events:
• The property is listed, and innocent
buyers bid on the property.
• The unsuspecting sellers are told
that their buyer is a limited liability
company (llc), but in fact it’s a shell
corporation created by the fraudsters
themselves.
• short-sale approval letters are forged
in favor of the LLc, using a template
from a prior approval obtained from
the bank and then forwarded to the
sellers to induce them to execute a
grant deed in favor of the LLc.
• The buyers are told that the short sale
has been approved, so they transfer
the purchasing money into escrow.
• The escrow company, which is
also involved in the scam, fails to
verify the veracity of the short-sale
agreement with the lender, as lender-
underwriting requirements could
jeopardize the scheme.
The sophistication of scams has increased with technology. In addition,
cash-strapped homeowners have become more desperate to sell. That is why
it can be helpful to use attorneys that are
familiar with real estate schemes to prevent fraud before it occurs or, alternately,
to unwind a scam and press charges
against wrongdoers after it occurs.
regardless, keeping yourself educated while also undertaking proper
due diligence can help your clients’
transactions move more smoothly and,
in certain cases, can even help you
avoid being liable for a breach of fiduciary duty. •
An example
criminal threats can come from a variety of places, both inside and outside
the mortgage industry. Let’s say, for
instance, that a real estate agent, escrow officer and short-sale negotiator collude with each other to scam a
pair of distressed homeowners. They
might begin by simply approaching the
Be diligent
This is just one example of the many
real estate scams that floated in the
market in recent years. It’s become critical for borrowers, brokers and lenders
alike to conduct proper due diligence
and ensure the safety of a transaction.
eric p. early is managing partner and Scott
e. gizer is operations partner of Early Sullivan Wright Gizer & Mcrae LLP. They’ve
been retained by several title insurers to
represent property owners and stop numerous attempted foreclosure proceedings
arising from fraudulent short-sale schemes
involving realtors, escrow companies, “
flippers” and at least one major bank, in order
to clear title to the properties and sue the
fraudsters to recover stolen funds. E-mail
eearly@earlysullivan.com and sgizer@
earlysullivan.com.
By ginger Bell
education specialist
go2training
Repair and Revitalize
FhA 203(k) loans can provide funds for major and
minor upgrades alike
imagine this scenario: a home has
been on the market for more than six
months without an offer. The sellers
are anxious, and their agent isn’t sure
what to do. “remodel the kitchen and
replace the countertops and cabinets,”
their realtor may instruct. But how can
the sellers be sure they’ll select colors
and styles that potential homebuyers
will like?
If this dilemma was shared with a
mortgage professional who has ex-
perience with the Federal housing
administration (Fha) Section No.
203(k) loan program, the solution may
be deceptively simple. a 203(k) expert
may suggest that the owners choose a
few different countertop and cabinet
samples and then place these samples
in the kitchen before the next showing,
complete with a sign that tells potential
buyers, “You choose.”
This mortgage professional knows
what today’s prospective homeowner
wants when it comes to upgrading
a property: choice. and that desire
isn’t entirely surprising — across the
nation, homebuyers are finding that
many properties on the market are in
dire need of upgrades or repairs. Short
sales, foreclosures and homes that
have spent too much time on the mar-
ket can often be in desperate need of
a makeover.
ginger Bell, an education specialist with
Go2Training, develops training programs for
many companies, including Plaza home Mortgage, OnlineEd and Mortgage Success Source.
Formerly with Dale carnegie Training, Bell has
more than 20 years’ experience leading public-speaking, leadership, customer-service, sales
and continuing-education workshops. Bell
is a Nationwide Mortgage Licensing System
(NMLS)-approved instructor and has received
education awards from the california and
Oregon associations of mortgage professionals. reach her at ginger@go2training.com or
visit www.go2training.com.
