Tag Archives: HomeFlux

Short Sale Supervisor Talks to a Real Estate Agent – Recorded Conversation

The Short Sales and Bank Fraud story continues to gain traction. After CNBC aired the story we brought them, dozens of other media outlets, bloggers and authorities have contacted me to discuss this topic.

Here is the story of how this fraud initially came to our attention, along with the evidence to back it up.

Last year, I was contacted by an experienced real estate agent in our network who negotiates many short sales. She had recorded a conversation between her and a supervisor in the loss-mitigation department at a major national lender, who she felt was trying to get her to do something illegal.

Here is the audio of that recording, along with the transcript. The names have been removed at the request of the agent to prevent backlash from the bank.

Listen: Recorded Conversation with Bank Supervisor

AGENT: OK, so the only way to settle with *LENDER* then is to get money from somebody else and pay it prior to – that’s what *LENDER-EMPLOYEE* suggested – pay it prior to close of escrow, outside of…. <unintelligible> Pardon me?

LENDER: That is something you can do.

AGENT: Pay it outside of escrow, off the HUD, prior to close.

LENDER: Right, that’s something you could do.

AGENT: And is that something you guys do regularly or you see people doing?

LENDER: Yes, that happens – we have people that send us money outside if they need approval letters <unintelligible> from the first, and once we receive the additional funds, the approval letter can be sent for what the first actually offered – so it happens.

AGENT: OK and what about the fact that the first says that, no more than you know, a certain percent is to go to the second?

LENDER: OK, if the first… Here’s the thing, if you’re asking what this is about – the first is saying “well here’s what I’m going to allow” and the first is saying “this is what we’re willing to pay out.”  If there’s a contribution, if you don’t want to be able to come up with the additional that we’re asking for – the first has already gave their approval on what they’re doing – what someone just comes up with has nothing to do with the first.

AGENT: Even if on this letter it says that “the second is not to receive any more than a certain amount”?

LENDER: The first can not dictate what we receive. The first is saying what they are only going to allow. That’s the amount that they’re allowing to us. If someone out there – the buyer – or a family member puts more money and says here’s what I want to give for you because here’s the additionally requested funds – that has nothing to do with the first.
You’re not asking the first to come out of their pocket any extra than what they are willing to give. So that that’s not any information that might have to be required on the HUD.
Hold on one second please.  <long pause>

LENDER: So I need to have the information – you’ve had the opportunity to go over this with *LENDER-EMPLOYEE* – did he explain all this to you on how this takes place?

AGENT: Well he does but I’m having a tough time, ******, I’m licensed and everybody else…

LENDER: It’s not illegal; it’s not a hard thing, this thing that has happened. The information that you’ve actually received from us – we’re actually trying to help you get this deal closed. If you choose to go back and tell the first what’s going on – you’re going to kill the deal.
So what actually happens prior to closing has nothing to do with the first. What happens at closing – that is information you can provide to them. If you are able to come up with additional funds not to get this deal closed prior to closing, then that’s fine – that’s irrelevant for the first. If you go ahead and you want to let the first know “well, here’s all the information that I have – here’s what’s going on” you will be the one to actually kill this deal. I’m trying to actually give you a way to go about getting this resolved. If you take our suggestion – you take the information that *LENDER-EMPLOYEE* has given you – you can have this done.
If not, then you know, those guys are going to foreclose on it and it’s a done deal. But it’s not like we’re holding up this process.

AGENT: Well, what about the form that the buyer’s lender puts out that there are – that everybody has to sign that says there are no side deals?  <long pause>
I mean that… How do I get around that?

LENDER: What you need to take care of actually is not going to be a problem. What they submit to us – there is $****** they are giving us – the only thing you have to worry about – I mean it sounds like you’re scared that you’re going to be fined for something because you are doing something you are not supposed to. This is what we do all day.

AGENT: Well yes, I don’t want to lose my license, go to jail, I mean, I have to sign…

LENDER: You’re not going to lose your license – we have plenty of realtors who do this, who actually understand how this whole process goes – and they realize that OK, if I want to get this done, this will take place. Nobody’s losing their license and nobody’s going to jail, nobody’s receiving a fine…
So and here’s the thing too, I’ll be really honest with you, if you are uncomfortable about working it, you can probably assign it over to someone else, where they would be able to do this – if it makes you feel that uncomfortable – you should probably just assign it over to someone else. Someone who’s actually been able you know – who’s done this before, who’s more familiar with it.
Not to be disrespectful or rude to you or anything like that, but we deal with this every day all the time, this is not something out of the norm. But if you feel like you are doing something that’s against your morals, please assign it to someone else who’s been able to do deals like this so they can get it done, and you can have a happy buyer and a happy seller.

AGENT: Well, how do I get, I mean what’s the logic or if I could understand – when I’m signing a paper put out by FHA that says there are no side deals – this is a side deal.

LENDER: This is a contribution. <long pause> You guys are able to come up with money in order to get this deal closed.

AGENT: OK

LENDER: OK. So the offer that we have it still stands – you can call *LENDER-EMPLOYEE* back and let him know if, what you’re going to do, and if you guys foreclose, we understand. If you’re not comfortable with this – go ahead and assign it over to someone else.

AGENT: <sigh> OK, well thank you for your time.

LENDER: No Problem

Short Sales, Bank Fraud and Off-HUD Payments

We recently uncovered a massive fraud in how some banks are handling short sales…

First, read “What is a Short Sale?” for an overview of the short sale process.

There has been a disturbing trend recently of lenders asking for back-channel, secret deals in order to approve a short sale on a home. These lenders demand that the payments are not disclosed on the HUD statement, intimidate agents and home owners, and even say up front that if the payments are disclosed, they will stop the short sale from proceeding.

The typical scenario is when there are two loans on a property (a “first” and a “second”, sometimes called an 80/20 or 90/10).

In a foreclosure, the lender in first position usually gets the house, and all the other loans are wiped out and get nothing.

On a property with two liens, both lenders must agree to the short sale, and the first lender will typically dictate that the second lender only receive a small amount of money (usually 5% or 10% of remaining loan balance) because the second would lose everything if the house was foreclosed on.

If anything more than a token amount is paid to the second lender, the first lender will generally not agree to a short sale.

Some lenders in second position are now asking sellers, agents, and buyers to make a large, cash payment before closing, that does not appear anywhere on the HUD statement or closing documents in order to approve a short sale. They say this payment must not be on the HUD-1 statement, because if the first lender found out about it they would likely stop the short sale.

These are major lenders encouraging real estate agents and others to commit fraud, and extorting money out of buyers in order to approve the short sale transaction.

This problem is massive, and over the past 45 days I have spoken to over 120 real estate agents and investors around the country who have seen this issue with many different lenders. Most do not want to speak up because they feel that if they say anything negative about these banks, they will be “blackballed” in the industry and will no longer be able to negotiate short sales with banks – thereby destroying their livelihood.

The net effect of all this is that homes are being foreclosed on when there is a ready buyer, agents are put in a position of choosing between their ethics and helping their client, and the housing downturn will be prolonged as more homes are unnecessarily foreclosed on. Banks are behaving in an incredibly unethical (and in some cases illegal) manner, which is the type of activity that helped bring on the housing crisis.

An addition, when buyers pay extra money to buy a home, and it is not disclosed in the closing documents, all future appraisals in the neighborhood are based on artificially low values – further depressing the local housing market.

If you see this happening please speak up! The only way to prevent banks from continuing to engage in this fraud is to publicize it, report it to the authorities, and refuse to engage in unethical, fraudulent or illegal transactions.

HomeFlux – Motivated Home Sellers Seeking Agents

Over the past few months we’ve been re-launching our Motivated Home Seller brand for real estate agents – HomeFlux.com.

It has been exciting to see how agents are rapidly growing their business through focusing on motivated home sellers – a segment of sellers that is rapidly growing, and is incredibly under-served by most real estate professionals.

With thousands of distressed home sellers contacting us each month, the success stories are pouring in from agents all over the United States and Canada who are listing and selling these properties in a very short period of time.

One agent called the other day and said the 3rd contact he received turned into a $1.4 million dollar listing and another broker has converted 46% of the motivated home sellers contacting him into listings!

If you are an agent or broker and not currently focused on the distressed property market, I encourage you to make it a part of your business plan.  This is a multi-billion dollar segment that is highly under-served and the agents that build expertise in this area will do very well over the next 5 years and beyond.