The response to the story we brought CNBC on fraud in short sales has been amazing!
The whole goal of getting this story out there was to change the practice and prevent it from happening in the future. It’s obvious from the response that this is a major issue, hopefully the authorities will take notice and investigate this practice.
Here is Diana Olick’s follow-up:
Our investigation into allegations of short sale fraud by some of the nation’s major lenders certainly struck a nerve in the lending community, but it also served to show me just how uneducated many in that same community still are, even today.
It’s clear from the dozens and dozens of comments on the blog page that many mortgage professionals still aren’t sure how exactly short sales work, and what is and is not legal.
Due to some technical difficulties on air Friday, I was unable to show a couple of MLS listings that were sent to me that clearly, on the public listing, demanded cash to the second lien holder outside of settlement as part of the transaction. Just so you know, that’s illegal. Yes, a second lien holder can demand payment on the loan, but it has to be documented as part of the sale.
And then just a few minutes after the story aired Friday, I received another email from my whistle-blower, Kayte Gentry:
Diana – we thought it funny that this came in about 10 minutes after the 2nd airing of the story…the email is to my Lead Negotiator.
The agent contribution of $500.00 can’t show on the HUD. Have that removed and resend just the HUD.
If it shows on the HUD the investor thinks they are getting it and not the 2nd lien holder.”
The author of the email reportedly works at Citi, as her email address shows. I have to believe/hope that she doesn’t even know what she’s demanding is illegal, otherwise I can’t imagine she would put it in an email. This is clearly fraud.
I also went on another real estate Web site that specializes in Realtor blogs, and there was a huge string/conversation of real estate agents explaining to each other how to keep second lien payments in short sales off the HUD settlement statements. Right there, in black and white, on the web.
I hope someone in regulation land is listening!