Housing Giants - November 24, 2008 - (Page 28)

f e at u r e cold, they’d escrow the $15,000 for the homeowner to have the work done with a landscaper of the owner’s choice once Spring arrived. The discounts — and paperwork — are everywhere. PrOceSSeS Key Whether or not landscaping credit or a new car would constitute fraud all depends on how the deal is structured and reported, says Dave Muti, an attorney, a mortgage planner and author of “Mortgages: What You Need to Know.” “They are OK as long as it is disclosed up front that [the free giveaway] is not part of the purchase price. If it is structured as they are going to give away free upgrades, they are just cutting their profit margin. “An example where it would be fraud is if I buy a house from you and it’s a $300,000 house and we agree upon that deal. If you then say, ‘Nevermind let me make it $310,000’ and you then give me a $10,000 seller credit, now that is mortgage fraud because it is inflating the value.” Muti echoed Nichols’ concerns that mortgage fraud is more likely when you have too many professionals working on the same side of the coin: The builder’s company, builder’s appraiser and builder’s mortgage company. “That’s when it started to happen.” The flip side can happen too, where builders offer special deals only if you use their affiliates. This isn’t necessarily fraud, but it can violate RESPA laws, say some experts, and it can look suspicious. Suspicious Activity Reports (SARs) related to mortgage fraud that are reported to the FBI have risen from more than 3,515 in fiscal year 2000 to more than 46,700 in fiscal year 2007, a 139 percent increase that represents approximately $1 billion in losses. According to the FBI’s “2007 Mortgage Fraud Report,” “the downward trend in the housing market provides an ideal climate for mortgage fraud perpetrators to employ a myriad of schemes suitable to a down market.” In other words, mortgage fraud is not disappearing. In fact, it is expected to rise, evolve and penetrate new areas within the industry. Given a fraud investigation is not completed until a year or two after the loan was originated, we’re likely to see fraud rates continue to increase. To keep your head out of trouble, simply report everything and falsify nothing. HG 28 HOUSING GIANTS.11.24.08 www.HOUSINGGIANTS.cOm http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm http://www.fbi.gov/publications/fraud/mortgage_fraud07.htm http://www.housinggiants.com

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