THE TIP OFF TO THE RIPOFF
"The cheaper the crook, the gaudier the patter" --Sam Spade in The Maltese Falcon
There are many of us who've had near entanglements with agents, lenders, inspectors, appraisers even clients who may have wanted our cooperation in what could only be defined as mortgage fraud. Below is just one mere 3-in-1 example I was reminded of today. If you have any to share, please post them!
Last year, I obtained a buyer through a friend's referral. The buyer was a very nice young lady and highly motivated to buy. She already had a lender that she was working with and wanted to keep him if possible. No problem! I asked to see some of her recent documentation so that I could see where we stood when presenting any future offers. The pre-approval letter she handed me was very generic looking. It was absent of letterhead and just didn't make the lender or my buyer look credible. I called the lender directly to see how strong of a borrower she was and what type of lender he was. During our conversation he talked really fast and wouldn't quite answer any of my questions directly. - Tip Off to the Ripoff
Me: So are you guys a direct lender? 
ACME Lender: Oh yeah, yeah, that's not a problem
Me (thinking) Huh? Didn't my question prompt a simple yes or no?
Me: So you are a direct lender?
ACME Lender: Yes.
Me: Great! Well could you please send her over a revised pre-approval letter reflecting that because the home she has her eye on is asking for a direct lender or she will have to cross-qualify. Oh and letterhead would be awesome (trying desperately to keep the sarcasm out of my voice!)
ACME Lender: No problem! I can't do it right now because I'm headed to a meeting in a few minutes, but I'll send it to you afterwards.
He ended up sending the revised letter a few hours later. After seeing it I understood why. It had letterhead from one of the major lending institutions and stated it was a direct lender. The problem was, it wasn't the company he worked for. It was signed by his brother who actually worked for the direct lending institution. ACME lender guy couldn't quite see why I had a problem with it because it was such a little thing and people change lenders mid-escrow all the time. Apparently he had done this with many other agents before. My response was that I didn't have a problem with changing lenders what I had a problem with was : 1) Frauding the listing agent and her seller 2) Creating a fraudulent situation for the direct lending institution whose letterhead was misrepresented fraudulently and 3) placing my client (who was also his) in a position of committing a federal crime? Oh and did he also forget she was in law enforcement? Not too mention what it would do to myself, my broker and everyone else that would be connected with it. My client was shocked, appalled and very annoyed and handled it accordingly.
In this industry we are constantly challenged to either participate or look the other way when it comes to various methods of fraud on both the buying and listing sides. It is imperative that individually buyers, sellers, agents, appraisers, inpsectors and lenders choose their Fraud Protection Team wisely. One compromise in any of the above areas could bring down the entire team.
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Hi Andi,
Thanks for sharing an informative and educational blog.
John
Hi John thanks! Have you had any run-ins that you can think of?
Howdy and Evenen Andi
They sure do come out of the wood work don't they. And this one sure was dum, seeing that the client is in law enforcement. Or maybe he just wants to be on dumes criminal, lol
Dumes criminal - hahaha! He was her client much longer than mine. I think he honestly got caught up in the deal and forgot. If he is slipping on things like that , can you imagine where else he is slipping? It's just a matter of time...
There are some shady mortgage people out there. I had my first run-in with one a few months ago (I actually blogged about it). Turns out he wasn't even licensed but he was totally acting like he was. Thankfully we caught it before the buyer had a contract on a house.
Andi - What a weirdo. Well my brother works there. Nice. This is one fraud scheme I did not know about that I could have included in my fraud series a couple of weeks ago. Good job getting this info out there.
Howdy and Evenen there Andi
More than likey he did only get caught up in the deal.
I had a seller one time call me up, after do-en an Inspection of their home, for a out of town Home Buyer client. The seller offered to pay me double my inspection fee, if I would not write up the major items that I found. That they had left out of theie disclosure of their home, like the buried oil storage tank in the back yard. I told him there was no way I would do that. After I got of the phone with him, I called my client's and told them about the call I had gotten, and then I called my client's agent.
This sounds more like gross incompetence than intentional fraud. Either way, everyone is better off without that LO. How did your buyer get connected with him?
Akron, Ohio
It is bad enough to have incompetent lenders but to add this to the mix makes me cringe if a buyer wants to use his or her own lender.............................chris
Fraud is sometimes wrapped in such a slick package it is hard for the buyer/seller to see. When it sounds too good to be true, it is. And when you can't get a straight answer, run run run for the hills! Great job on your part.
I was reading a recent scientific article that indicated that certain slimes can grow under almost any conditions. I am not sure this was one of the contexts they were thinking about but it does go to illustrate their point.
Oh, Dale, Thanks for doing the right thing when slime tried to grow in one of your inspections!
I agree with Thomas (#8). This sounds like pure incompetance, although there might be a case for misrepresentation. Basically the guy on the phone was an idiot and probably won't survive the tightening regulation & licensing changes.
Michael's comment (#11) is a bit over the top. Sure, anyone can write a "pre-approval" letter, but most reputable loan officers will have already checked income and run credit. Disclosing full approvals including credit scores, debt ratios, and income to a seller would be a VIOLATION of privacy laws. A seller does NOT need to know these things ... only the general type of loan being done (Conventional, FHA, VA, USDA, etc), and who's giving the pre-approval.
I have had clients who are millionaires buy $100k homes with an $80k loan. None of the seller's business how much money they have or what their credit scores are. If you have a first-time-buyer with a 621 credit score and the minimum for the program is 620 ... disclosing that would scare a seller, but the buyer still does qualify.
There has to be a level of trust that the mortgage pro has done their due diligence. Comes down to 3 things ... reputation, YOU calling them to confirm details, and advising your client to look elsewhere if you smell a rat.
Unbelievable! I love the quote, and just had that same thought about being able to tell about a person from their "tip offs"
Excellent post, too many people have no idea what fraud really is, they live their lives thinking little white lies are OK and this is how they get caught. On the other hand, comment number 8 is on track, it looks the dude is pretty incompetent to me.
Eric (Comment #13) and I disagree though, sometimes the seller does need to know credit scores, ratios and income just because of situations lke this. If I am a seller agent and the buyer insists on using a lender I have never heard of, then we have every right to ask for the buyer's qualifying info so we can make our own judgement as to "how safe" it will be to accept the deal. I have seen too many deals fall thru where the lender insisted everything was gonna be fine to take anyone's word for it, especially when I don't knwo the loan officer. It's not an invasion of privacy when the buyer voluntarily provides it .
If you look at the "all the things wrong" with the real estate market, 80% of those things stem from underqualified/uneducated people (loan officers, agents, buyers, sellers, etc) doing the wrong things and out of that probably 90% of those problems would have been addressed had someone had the proper knowledge and stood up and pointed out something obviously wrong, as Andi did in this story
don't you just hate the line "well, we do it all the time and no other agents have ever objected". Good for you to put him on notification that it is not ok for you.
Great way to handle the situation, Andi. We've got to know our stuff, 'cause not everyone else does, or even cares. Probably more than one of us will need to use your post as a script.
I was tied up all day today showing homes so I'm just now back in the office!
Stacey - that is just awful!
Nevin - If I had of known you were looking for contributions I could've given you quite a few.
Dale - It's a good thing you are honest. That was a lawsuit ready to happen. The least they could've done was offer you triple. lol JUST KIDDING!!!!
Thomas - It might not have been intentional but a judge wouldn't have cared. I have no idea how she was referred to him. Good riddance!
Chris - I think more times than not when I haven't used my lender its been a hot mess. The time before that situation, we used my buyer's lender and he screwed up the COE date. I made him pay the per diem. I'm sure he has nightmares about me to this day. But my buyer's LOVE me. :)
Andrea - thanks! You really have to flesh out the crafty ones.
Michael - The debt ratio is a lot of information to be providing if not specifically asked to furnish. I will usually furnish DU if my client doesn't have direct lender and seller is asking for it or there is multiple offer situation. (with client's permission)
Marshall - LOL about the slime article. That would've been a good lead-in to the blog.
Eric - Thanks Eric - He looked like a rat, walked like a rat, he was a rat. Its definitely more than misrepresentation. You'd be surprised how many employees get fired and have charges pressed against them for fraud (using company letterhead). It puts the company in liability.
Carla - I love classic movies because they have some of the greatest lines. I got the "tip off to the ripoff" from my brother. I told him I would use it for a future blog. :)
Jason - Thank you! Re the DU, if a person is asking for a direct lender and my client doesn't have one, I will (with permission from my client) use the DU as an alternative. Most of the times this will suffice. :)
Jennifer - that type of flippant response annoyed me more than the actual act.
Lottie - Hi there! Thanks! You hit the nail on the head when you said not everyone cares.
Thanks for a great post. People like that crawl out from under their rocks every day.
I once had a lender email me a generic pre-approval letter, instructing me to just add 'anyones' name and approved loan amount whenever I needed a lender letter. Yes, I did find another lender!
Tom - in this economy there are way too many rock dwellers. :)
Joetta - oh my gosh!! LOL That's terrible!
Know your values and do not bend them. Yes, you have a responsibility to your client, company, etc; however, you first responsibility is to yourself and your family. Fraud hurts that later much more than the former. I have told many people no, because I did not agree with what they were attempting to do (and I was very direct with why I was not doing business with them).
Remember, Real Estate has a paper trail that never disappears. An action now can come back to bite you two years down the road.
Aaron
So true Aaron, so true.
Applying common sense and asking the questions you did will keep you sane in this business.
Ty
I'm not sure this was fraudulent in nature. Stupid - unprofessional - slick? Probably. Either way not a good fit for your buyer.
I saw a lot more of that shady stuff back in the boom, but it seems like most of those guys are now out of business or in jail. However, it still shows its ugly head every once in a while. We always have to stay informed and on our toes to make sure we stay out of compromising situations. I'm glad you put that guy in his place!
Ty - yep! Sane is good.
Lyn - Stupid, unprofessional, slick and frauduent - lol. Using company letterhead fraudulently, misrepresentation to the seller and listing agent. the list goes on...
Matt - I'm glad that I'm not so desperate that I wouldn't see it for what it is because I'm so blinded by need to close a deal.
I wish agents would get involved : they don't have to become loan officers just ask the lender for a few details...like i do not want a preapproval letter unless it states the loan program...FHA/conventional and terns...30 yr fixed and the interest rate and the loan amount that the buyer is approved at