Housing Giants - November 24, 2008 - (Page 21)

Foot traFFic is scarce, sales are slow, quarterly earnings are way down, and inventory is just sitting, sitting and sitting. You feel desperate to maintain or salvage your bottom line however you can. You result to sales gimmicks to help entice buyers to sign on the dotted lines so you can stop the company from metaphorically bleeding as you watch profits rinse down your spec home’s Kohler drain. The incentives you offer run the gamut from offering free upgrades to financing closing costs, reducing prices or even stocking a car in the garage. How far will you and your sales team go to close the deal? Perhaps you’re not sure, but if you’re not careful with what you offer or how you report it to the lender, you could end up committing mortgage fraud. The FBI defines mortgage fraud as “any material misstatement, misrepresentation or omission relied upon by an underwriter or lender to fund, purchase or insure a loan.” It is estimated that about 10 to 15 percent of all loan applications contain misleading or false statements on the part of either the buyer or the seller, say experts. A large percentage of those committing fraud are unsuspecting individuals who are just anxious to close a deal. Fraud has become a tool of desperation that companies and individuals use to maintain lifestyles, livelihoods and bottom lines, says a recent fraud report. Since the housing bubble has burst, the number of fraudulent loans issued during the first three months of 2008 skyrocketed 42 percent compared to the same period in 2007, according to the August report from the Mortgage Asset Research Institute (MARI). Although it’s true that scrupulous individuals engaged in straw sales or foreclosure rescue scams have driven up the mortgage fraud rates, a fair amount of fraud is also committed by home builders and their agents, even if inadvertently. If you offer a $15,000 landscaping allowance for a buyer to cash in after winter thaws but you don’t properly document it on the loan application, you are committing fraud. The same goes if to close a deal you roll in the cost of a flatscreen TV, a car in the driveway, the furnishings from the model or other chattel without properly disclosing them to the lender — even if you raise a previously agreed upon sales price to give down payment assistance or fund the closing costs. www.Housinggiants.com 11.24.08.Housing giants 21 http://www.marisolutions.com/pdfs/mba/mortgage-fraud-report-2008Q1.pdf http://www.marisolutions.com http://www.marisolutions.com http://www.housinggiants.com

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Housing Giants - November 24, 2008

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