Apparently there is new mortgage fraud out there today, allegedly perpetuated by agents of, yes, the big banks; meanwhile, regulators, lawmakers and all forms of financial oversight boards are talking about new regulations to guard against mortgage fraud out there today. It’s affecting Miami homes
, Miami Beach real estate
and other properties nationwide.
CNBC Real Estate Reporter was first alerted about this by Jeremy Brandt, the CEO of several companies that bring short sale agents, investors and sellers together.
Over the past few months Brandt has gained a huge network of short sale real estate agents. His companies include 1800CashOffer, HomeFlux.com and FastHomeOffer.com.
During the housing boom, millions of Americans pulled cash out of their Miami homes
, Miami Beach real estate properties and others nationwide in the form of home equity loans and lines of credit. They also used "piggy back" loans in order to get even lower interest rates on their primary mortgages. Now, many of the borrowers are in trouble, and many are so far underwater on their loans that they don't qualify for any refinance modification choosing short sales as a way out. According to the National Association of Realtors, by the end of 2009 about 12% of all home sales were short sales.
The second lien holder has to drop the lien, in order for a short sale with two loans to happen. There’s no short sale if they don't and the Miami homes
, Miami Beach real estate
properties and others nationwide go into foreclosure and the first lien holder gets the house because second liens are subordinated debt to the primary loan.
Basically, the second lien holder gets nothing; the first lien holder generally negotiates some partial payment to the second lien holder. In order to get the second lien holder to drop the lien, the second lien holder doesn't have to agree, but more and more are doing so. This is all legal.
This is what's apparently happening quite often recently; what's not legal is that many second lien holders are getting close to nothing and they are now supposedly requesting money on the side from either real estate agents or the buyers in the short sale. This is in the form of cash, off the HUD settlement statements, so the first lien holder doesn't see it.
"They are pretty clear and pretty upfront about the fact that if the first lender knows they are getting paid, the first lender will kill the short sale," says Brandt. "So these second lenders are asking for the payments off the closing documents, off the HUD statement, usually in a cashiers check prior to closing. Once they receive that payment, they will allow the short sale to go through, which according to RESPA laws and the lawyers that we have spoken to on the topic is not legal."