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Large Banks Accused of Short Sale Fraud

February 1st, 2010 by Dawn Rickabaugh

Jeremy Brandt is the CEO of companies like 1800CashOffer, HomeFlux.com and FastHomeOffer.com . . . all companies that bring lots of distressed sellers, investors and short sale agents together.

Over the past several months he’s been receiving all kinds of questions and complaints from his short sale agents about trouble with second lien holders.  Read the full article, written by CNBC Real Estate Reporter, Diana Olick, at: http://www.cnbc.com/id/34877347.

Brandt has apparently documented at least 200 agents that have had trouble with Citi Mortgage, JP Morgan Chase, Bank of America and other large banks, and a friend of mine recently told me the same thing.

She works tirelessly to help troubled home owners.  She spends countless hours working with the lenders to get short sales approved so people can move on with their lives, and then is asked for most of her commission at the closing table by these . . . banks (to be politically correct, because I was actually thinking of other descriptive words).

Since there’s no equity to cover many second mortgages in a foreclosure/short sale situation, they’re typically getting very little at the closing table.   So, they got this bright idea . . . why not soak it from the agents or the buyer, and have them pay a little cash on the side?

All off the books, of course, like a mangy drug deal, because if the first lien holder knew this was going on, they would definitely cancel the transaction and just take the property to foreclosure to wipe the 2nd off completely.

A HUD specialist commented that this is clearly illegal and a violation of RESPA.  So far, there aren’t any active investigations, though . . .

But why would there be?  I mean, big banks are ‘too big to fail,’ so we’re rescuing them with taxpayer dollars anyway . . . why would we care that the poor beggars are grabbing for a little more?  Just look the other way, George . . .

All the new mortgage regulations that are effective as of January 1st are cumbersome and ultimately misguided and damaging to the consumer, but probably well-intentioned (never mind that the original fraud was perpetuated by the Fed and the fiscal policy established in Washington and on Wall Street that allowed the mortgage debacle in the first place).

It reminds me of the massive increase in airport security imposed on millions of average citizens after the “authorities” allow a known terrorist suspect to board a plane.

But it’s a good plan, really . . . orchestrate disaster, create fear, ask the trembling masses to give up a few civil liberties in exchange for “safety.”  Baa baa black sheep, have you any wool?

But back to the short sale conversation . . . wow.  In the early days of short sales, I literally burned myself out working on hundreds of short sale transactions, and I know several successful agents now that won’t even touch them.

If anyone ever asks me to help them with a short sale listing, I hire a professional company who specializes in short sale negotiation so my client has the best possible outcome, and I’m not being asked (at least to my face) for my grocery money by some starving financial behemoth.

Dawn Rickabaugh is a RE Broker, Owner Financing Coach and Note Buyer. Reach her at (626) 292.1875 or www.notequeen.com. Always consult with your CPA, tax attorney and/or financial advisor before selling property or paper.

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