Real Estate Loan Fraud Alert

Valuation loan fraud occurs when any party to the purchase and sale of real estate, including the real estate licensee, misrepresents information about the transaction to the mortgage lender.

To decrease the likelihood that you'll become a party to something illegal (the courts call this "fraud"), note some of the hallmarks of valuation loan fraud:

• Your instincts tell you something just doesn't seem right or the "deal" seems to be too good to be true. Sometimes you'll hear that "we do this all the time."
• The property has been on the market a while but sells for significantly more than the original price.
• The buyer insists on using a specific appraiser.
• Upon the seller asking a question, the lender says "it's fine with me as long as we don't put it writing."
• When attempting to amend a transaction in writing, the lender says "if you must put this in writing, do it in the closing instructions--anything that isn't sent to me."
• An offer is submitted to the sellers with an amendment stating the sellers pay money to the buyer or third party to cover repairs. But the buyer hasn't had the inspection.
• Commissions are calculated based on an amount less than the purchase price indicated on the purchase and sale agreement.

While a transaction with some of these examples may be legal, each situation must be evaluated on its own.

Another particular about mortgage fraud is that if the concession is shown on the HUD-1 settlement statement, there's no fraud. But that's only true when the description on the HUD-1 is accurate.