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velecico
3214 Posts |
 Posted - 12/29/2007 : 11:55:15 AM
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I got an agreement of sale today from a realtor looking for a prequal on a shortsale , the buyer lives next door , he has a current mortgage for $800,000 on a home he purchase in 2005 with no money down , the home he has under contact is right across the street from his present home , the offer is for $500,000 and it looks like the bank will accept it
The borrower plans to buy it as a primary , once he moves in , they will stop making payments on the $800,000 loan that they have with CW
He qualifies full doc and has a 770 FICO , he figues letting his credit tank is not a big deal when he is lowering his mortgage debt by $300,000 .
I told him the new bank may deny the deal based on occupancy , tried to convince him to go NOO but he does not want the higher rate .
What do you think ? anyone had this scenario yet , I sure it will be happening more and more especially in CA and FL |
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Scrooge McDuck
7508 Posts |
Posted - 12/29/2007 : 11:57:36 AM
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| i read about this scenario revealing itself a few months back. there will be more to come. |
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lucky1s
3339 Posts |
Posted - 12/29/2007 : 12:12:23 PM
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Somebody tried that with myself and my husband who is a realtor and we declined to be a party to it. But that was earlier in the year and they were going 100% stated on the purchase. ie didnt qualify for both houses.
It is fraud on some level though I cant exactly say if it is with the new lender or the existing one.
But if he qualifies full doc, who are you to judge?
Better get home a 30 year fixed as he may well never be able to refi again.
I'm sure we will see more and more of this. |
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velecico
3214 Posts |
Posted - 12/29/2007 : 12:18:43 PM
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He told me his present loan has never been late , has an Option Arm |
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sheriephillips
396 Posts |
Posted - 12/29/2007 : 1:11:02 PM
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The deal presents huge red flags. One, the underwriter will see he already has an OO property with a higher loan amount, so at best, she may consider the new purchase NOO. Secondly, the borrower is showing his hand, what if values continue to fall, will he walk away from this property as well? Even if he already has a buyer on his current home as a shortsale, that only shows if something happens in the future, the borrower will look for his current lender to eat the difference if values continue to go down or if he refi's cashout and finds himself upside down again. I think at best he should do this as NOO and accept the fact he owes $300K less and buy down the rate (if the new lender will even accept it, it's obvious what he's doing and doesn't show much character on his part).
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SimpleMan
545 Posts |
Posted - 12/29/2007 : 1:23:38 PM
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I don't know about the walking away part.....I would prolly pass...
But if you have a listing agreement and 12 months reserves most lenders will take it.
I would be worried about knowing his plan, though. It's kinda like stealing from the bank. Clearly, it's unethical, not sure if it's illegal. |
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Mandyvilla
2704 Posts |
Posted - 12/29/2007 : 1:44:18 PM
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There are certainly many red flags, however, in the day of automated approvals, how deep will they look? Depends on the lender and if only the underwriter must sign off on an AUS - How much is the buyer putting down? That is really the key to this scenario. However, if this scenario was across town, closer to something yada yada, I could see it going through fine OR receiving a counter offer as an investment loan. If he is in an Option ARM, rent just may cover the minimum payment (or what is showing on CR) and we get closer to making sense of this purchase.
As far as breaking a law, I wish someone would say how, because everyone I have quizzed, replies with a blank stare (attorneys). You cannot show fraud on the home the buyer is walking away from - he lived there for 2 years, made timely payments and it got to be too much - having a home go into foreclosure is not a crime. He won't be letting the new purchase go to foreclosure, he needs a (nice) place to live. I think the whole set up stinks and these actions should be criminal, but how? |
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Scrooge McDuck
7508 Posts |
Posted - 12/29/2007 : 1:59:41 PM
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1 thing i know for a fact... someone will write this loan.
if you didnt know the plan, you would probably do it.
in my opinion, a mortgage is a contract which allows both parties to walk away from their deal if they dont like what is going on. if the borrower doesnt like the agreement they are in, it is their right walk away. when they do however, the bank has the right to get their collateral. its just how it is. |
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Mandyvilla
2704 Posts |
Posted - 12/29/2007 : 2:18:48 PM
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quote:
Originally posted by Scrooge McDuck
1 thing i know for a fact... someone will write this loan.
if you didnt know the plan, you would probably do it.
in my opinion, a mortgage is a contract which allows both parties to walk away from their deal if they dont like what is going on. if the borrower doesnt like the agreement they are in, it is their right walk away. when they do however, the bank has the right to get their collateral. its just how it is.
Just because I agree with everything in your statement, doesn't mean I like it. In fact, I get down right PO'd about it, not that will do much good.
I will do this loan for .25% less than his best quote. |
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mgraham224
950 Posts |
Posted - 12/29/2007 : 2:19:16 PM
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"As far as breaking a law, I wish someone would say how, because everyone I have quizzed, replies with a blank stare (attorneys). You cannot show fraud on the home the buyer is walking away from - he lived there for 2 years, made timely payments and it got to be too much - having a home go into foreclosure is not a crime. He won't be letting the new purchase go to foreclosure, he needs a (nice) place to live. I think the whole set up stinks and these actions should be criminal, but how?"
I agree. I don't know if the whole thing necessarily stinks or not, but the fact that the house is across the street does stink a little.
I have come across the same thing, and same vague answers from attorneys. I have a client doing something similar right now, although he has 4 mortgages over 500k, and he is downsizing to something under 400k, just so he has a place to live. We've been wracking our brains trying to investigate the legality of it. One of the arguments the client has made with which I can't disagree is the following: "All four of my houses are upside down and are going to be short sold or foreclosed anyway. If I have the option to lock in to a 30 year fixed payment I can afford on a townhome that's 1/3 the value and size of my primary residence, how does that harm anyone? In fact, doesn't it only help?"
I guess if he could afford to keep his current cheapest loan and move into that house it would be a different story, but it's an ARM that's about to pop, so no can do.
We haven't yet begun negotiating the short sales yet and I don't think he has closed on the new house. I'm curious if anyone else has similar experiences. |
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godofmortgage
229 Posts |
Posted - 12/29/2007 : 2:52:30 PM
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| huh?? he's has a shortsale set up for the house he "plans" on defaulting on?????? He has to pay taxes on that money (i.e. the forgiven debt is considered your profit) This guy is setting himself up for a very expensive april 15th!!! Hopefully for his sake he makes absolutely no money and the "profit" he realizes from the forgiven debt wont prevent him from making a payment on the new property. Run for the hills.... |
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lucky1s
3339 Posts |
Posted - 12/29/2007 : 2:55:15 PM
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| I understand there is some legislation in the works that will forgive that forgiven debt if the property was his PR at the time. |
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slants
4189 Posts |
Posted - 12/29/2007 : 3:08:17 PM
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quote:
Originally posted by lucky1s
I understand there is some legislation in the works that will forgive that forgiven debt if the property was his PR at the time.
Cancellation of Debt 1099 will be forgiven if he has owned and lived in the house for > 2 years and it is a "qualified" residence (legislation is still pending). I can't see any lender approving a purchase for lower value right across the street from the current residence as an OO. It'll invariably be countered as a NOO. |
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jenweir
93 Posts |
Posted - 12/29/2007 : 3:15:37 PM
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I was contacted by an agent with this same scenario just last week since the prospective borrowers could not sell their current home and was prepared to walk away after purchasing the replacement home at a lower price and using FHA financing, no less.
While listening to the story of the borrowers' grief, I kept remembering one of my grandmother's favorite sayings, "what a tangled web we weave when we first practice to deceive".
I suggested to the agent that her clients work out a short pay with their current lender in order to sell as they had considered renting it but the market rent would not even cover 1/2 of the mortgage. If they are successful in getting the house sold with the short pay blessings of their current lender, they can start over with a clean conscience.
Conclusion.....would not be a part of this scheme.
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dellloans
234 Posts |
Posted - 12/29/2007 : 5:17:51 PM
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| I have a client with perfect credit, 780 middle, who has a loan with Wells Fargo for $520,000. He is not going to be able to afford his mortgage in 9 months no question whatsoever. He called Wells a bunch of times inquiring what to do. One of his main issues was he wanted to maintain his perfect credit at least until he buys a new house. So his last call with Wells he was telling the lady in loss mitigation all the scenarios he was considering and he asked he what was the right thing to do and she told him to get it listed with a realtor ASAP. That was 2 weeks ago this past thursday. He calls a realtor that day and realtor lists it on Saturday. By monday 3 people had seen it and they had 2 offers, 1 which they accepted pending approval from Wells. Now, this is my buddy by the way, I have him approved with Homecoming putting down 5% with having the house sold or the house not being sold, buying a new house with a loan amount of $230,000. So the net effect is he is going to lower his loan amount by $300,000 and be in a house he can afford. I think this is without question the right thing to do here, morally and financially. I mean what should he do if he knows he cant afford his payments in 9 months? Make the mortgage payment for 9 months than stop making payments and drag foreclosure out for another 9 months? They recieved an offer for $450,000 so with realtors fees its about a $90k hit for Wells. We both live in the same town in Northern California and prices are going to continue to plummett so the way I look at it he is doing Wells Fargo a favor now and saving them a lot bigger hit down the road. This of course is if Wells approves the short sale |
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sheriephillips
396 Posts |
Posted - 12/29/2007 : 5:42:04 PM
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quote:
Originally posted by dellloans
I have a client with perfect credit, 780 middle, who has a loan with Wells Fargo for $520,000. He is not going to be able to afford his mortgage in 9 months no question whatsoever. He called Wells a bunch of times inquiring what to do. One of his main issues was he wanted to maintain his perfect credit at least until he buys a new house. So his last call with Wells he was telling the lady in loss mitigation all the scenarios he was considering and he asked he what was the right thing to do and she told him to get it listed with a realtor ASAP. That was 2 weeks ago this past thursday. He calls a realtor that day and realtor lists it on Saturday. By monday 3 people had seen it and they had 2 offers, 1 which they accepted pending approval from Wells. Now, this is my buddy by the way, I have him approved with Homecoming putting down 5% with having the house sold or the house not being sold, buying a new house with a loan amount of $230,000. So the net effect is he is going to lower his loan amount by $300,000 and be in a house he can afford. I think this is without question the right thing to do here, morally and financially. I mean what should he do if he knows he cant afford his payments in 9 months? Make the mortgage payment for 9 months than stop making payments and drag foreclosure out for another 9 months? They recieved an offer for $450,000 so with realtors fees its about a $90k hit for Wells. We both live in the same town in Northern California and prices are going to continue to plummett so the way I look at it he is doing Wells Fargo a favor now and saving them a lot bigger hit down the road. This of course is if Wells approves the short sale
This borrower is doing it the right way. He's being honest and upfront. He's making changes since he can't afford his home. He alerted his lender, did exactly what they told him to do and priced it right to get offers rather quickly. This senerio differs from the original story, which was to buy a home across the street since it's cheaper and just walk away from the current home.
So far, I haven't seen prices drop hundreds of thousands of dollars in my neighorhood. I live in a highly desireable area (Irvine, California (Orange County) and we're not seeing the huge decreases in value as described by velecico. There's just so much to be said about this situation. I wouldn't want to be in a home with a $800K mortgage valued at $500K - it could take 10+ years to get back up to that value. In the meantime, the borrower is paying a high mortgage payment on a depreciating asset and will struggle to breakeven and yet, will have paid close to a million dollars in interest on that loan by the time the value goes up. This is a hard one, it really is. |
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mgraham224
950 Posts |
Posted - 12/29/2007 : 5:58:35 PM
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Yeah, my guy has called all his lenders too. Everyone knows what's going on. I can understand someone with a high credit score needing to buy the cheaper house first in order to qualify for the loan before they start defaulting on their other loans.
As far as the 1099c, some lawyers even say that CA is exempt. Also, some accountants say they can offset any 1099 reporting with a loss on the taxes. If the majority of accountants and attorneys I talk to are correct, the 1099 is a bookkeeping issue for the lenders but I have not seen it be an issue for any borrowers. Every is freaked out about it and says "watch out for the 1099!" but I haven't seen it hurt anyone yet.
People that get approved for short sales generally have an economic situation that precludes that panic. If anyone has FIRST HAND experience with someone actually getting burned by the 1099, please report. I'm sure we'll have a lot more data come the end of January.
Also, I've heard that some Loss mit. departments are so bogged down that some of that accounting stuff is falling by the wayside as they try to maximize the amount of money they can collect today.
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MisterVA
5815 Posts |
Posted - 12/29/2007 : 6:16:38 PM
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quote:
Originally posted by velecico
I got an agreement of sale today from a realtor looking for a prequal on a shortsale , the buyer lives next door , he has a current mortgage for $800,000 on a home he purchase in 2005 with no money down , the home he has under contact is right across the street from his present home , the offer is for $500,000 and it looks like the bank will accept it
The borrower plans to buy it as a primary , once he moves in , they will stop making payments on the $800,000 loan that they have with CW
He qualifies full doc and has a 770 FICO , he figues letting his credit tank is not a big deal when he is lowering his mortgage debt by $300,000 .
I told him the new bank may deny the deal based on occupancy , tried to convince him to go NOO but he does not want the higher rate .
What do you think ? anyone had this scenario yet , I sure it will be happening more and more especially in CA and FL
Had a guy tell me he wanted to buy a rental property in Northern NH. When I started telling him about the NOO program, he said "What if I call it a 2nd home?" Told him he already told me his plans and you cannot unscramble eggs. I am sure he went somewhere, but I wasn't about to wink. You should take that stand as well. Although, I might just send the guy away period. |
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dellloans
234 Posts |
Posted - 12/29/2007 : 6:25:51 PM
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| anyone had any experience with Wells on shorts sales? I know they have been waiting for about a week and a half for answer if they will accept short sale. I dont know why they would decline given market conditions and 08 outlook. |
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SoCalRay
1146 Posts |
Posted - 12/29/2007 : 7:15:16 PM
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Wells likes offers of cash on short sales
He would not damage his credit if he does it right. He could move into the house accross the street and then short sale the house that he owes the larger amount.
A short sale will not ding his credit if done right. |
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Mandyvilla
2704 Posts |
Posted - 12/29/2007 : 7:19:09 PM
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quote:
Originally posted by slants
quote:
Originally posted by lucky1s
I understand there is some legislation in the works that will forgive that forgiven debt if the property was his PR at the time.
Cancellation of Debt 1099 will be forgiven if he has owned and lived in the house for > 2 years and it is a "qualified" residence (legislation is still pending). I can't see any lender approving a purchase for lower value right across the street from the current residence as an OO. It'll invariably be countered as a NOO.
It's a done deal on the taxes unless I am mixing this up w/ something else.
"Today, President Bush signed the Mortgage Forgiveness Debt Relief Act of 2007, which will help Americans avoid foreclosure by protecting families from higher taxes when they refinance their home mortgages. This Act will create a three-year window for homeowners to refinance their mortgage and pay no taxes on any debt forgiveness that they receive. Under current law, if the value of your house declines, and your bank or lender forgives a portion of your mortgage, the tax code treats the amount forgiven as income that can be taxed.
* This Act will increase the incentive for borrowers and lenders to work together to refinance loans and allow American families to secure lower mortgage payments without facing higher taxes."
Can be found at the White House Press Room online:
http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html
Now, this only deals w/ short sales....I haven't heard about foreclosures getting the same treatment.
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velecico
3214 Posts |
Posted - 12/29/2007 : 8:48:43 PM
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quote:
Originally posted by MisterVA
quote:
Originally posted by velecico
I got an agreement of sale today from a realtor looking for a prequal on a shortsale , the buyer lives next door , he has a current mortgage for $800,000 on a home he purchase in 2005 with no money down , the home he has under contact is right across the street from his present home , the offer is for $500,000 and it looks like the bank will accept it
The borrower plans to buy it as a primary , once he moves in , they will stop making payments on the $800,000 loan that they have with CW
He qualifies full doc and has a 770 FICO , he figues letting his credit tank is not a big deal when he is lowering his mortgage debt by $300,000 .
I told him the new bank may deny the deal based on occupancy , tried to convince him to go NOO but he does not want the higher rate .
What do you think ? anyone had this scenario yet , I sure it will be happening more and more especially in CA and FL
Had a guy tell me he wanted to buy a rental property in Northern NH. When I started telling him about the NOO program, he said "What if I call it a 2nd home?" Told him he already told me his plans and you cannot unscramble eggs. I am sure he went somewhere, but I wasn't about to wink. You should take that stand as well. Although, I might just send the guy away period.
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velecico
3214 Posts |
Posted - 12/29/2007 : 8:49:36 PM
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I see no reason to walk away from the deal , his present mortgage is not my concern |
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Mandyvilla
2704 Posts |
Posted - 12/29/2007 : 8:57:06 PM
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I know this question is not relevant, but I have to ask if you know who the owner bank is that is selling the foreclosure.
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MisterVA
5815 Posts |
Posted - 12/29/2007 : 8:57:25 PM
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| You will if it becomes a buyback issue. |
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mgraham224
950 Posts |
Posted - 12/29/2007 : 9:14:33 PM
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quote:
Originally posted by MisterVA
You will if it becomes a buyback issue.
How does nick have any liability for a mortgage he has done no work on? Or are you talking about the possible new loan?
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BrokerCA
2350 Posts |
Posted - 12/30/2007 : 04:04:30 AM
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This thread is being read and discussed at another popular blog.
http://calculatedrisk.blogspot.com/ |
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shoe
113 Posts |
Posted - 12/30/2007 : 04:08:54 AM
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| Been involved with a few short sales. Be prepared to wait a while for them to agree on the write off especially because the loan is not in default. |
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Scrooge McDuck
7508 Posts |
Posted - 12/30/2007 : 06:53:00 AM
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the problem with the whole thing is that the guy told you what he was up to. even further, he's trying to do it all in his name. many people out there are wise to the game, and will put the next house in their wife's name, or their mom or something. they wont tell the LO what the whole deal is, and their intentions for their old house, and will get this deal done.
we need to ask a TON of questions while taking an app, but if done properly, a borrower can get away with murder and we would never know the difference. |
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EsMoix
44 Posts |
Posted - 12/30/2007 : 07:16:51 AM
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"I see no reason to walk away from the deal , his present mortgage is not my concern."
Tanta at Calculated Risk explains in this comment why his present mortgage is your concern. http://www.haloscan.com/comments/calculatedrisk/1962339236824829396/#373360
"The broker is now in possession of material fact that the proposed lender on the new transaction has a right to know. If the broker does not tell the lender, the broker is party to misrep. If the broker does tell the lender, the loan won't get made."
She poses some challenging questions as to how the borrower will complete the 1003.
As an industry, isn't this how we collectively arrived at this mess, haven't we been colluding with borrowers on how to game the system. First, with a wink and nod, we (as an industry) absolve ourselves in a borrower's decision to misrepesent household income using the stated income product and/or occupancy status, now we appear to be facilitating a borrower's "rebalancing" of his debt obligation. |
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mwfan55
377 Posts |
Posted - 12/30/2007 : 07:20:04 AM
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quote:
Originally posted by velecico
he figues letting his credit tank is not a big deal when he is lowering his mortgage debt by $300,000 .
This is why the Govt should not forgive the tax consequences.
I could not do this loan. |
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darkstar
15821 Posts |
Posted - 12/30/2007 : 07:52:07 AM
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quote:
Originally posted by Mandyvilla
There are certainly many red flags, however, in the day of automated approvals, how deep will they look? Depends on the lender and if only the underwriter must sign off on an AUS - How much is the buyer putting down? That is really the key to this scenario. However, if this scenario was across town, closer to something yada yada, I could see it going through fine OR receiving a counter offer as an investment loan. If he is in an Option ARM, rent just may cover the minimum payment (or what is showing on CR) and we get closer to making sense of this purchase.
As far as breaking a law, I wish someone would say how, because everyone I have quizzed, replies with a blank stare (attorneys). You cannot show fraud on the home the buyer is walking away from - he lived there for 2 years, made timely payments and it got to be too much - having a home go into foreclosure is not a crime. He won't be letting the new purchase go to foreclosure, he needs a (nice) place to live. I think the whole set up stinks and these actions should be criminal, but how?
Knowing he is conspiring to screw his current lender would stop me right there...It's a premeditated act and the fraud will be how he explains to use the current home, unless he states on the app that he plans on walking away from it...
This isn't good for you but I believe he has a leg to stand on as far as getting current lender to reduce his current mortgage balance...I've helped a few people with this scenario recently...Call me if you want to hear it, too much to type... |
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1stintegritymort
1289 Posts |
Posted - 12/30/2007 : 08:23:18 AM
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| if you know that the borrowers are going to walk away from their current loan and you do their new loan, then you are committing loan fraud. at this point i would not do the loan for them even if it means you lose some money. everyone wants to talk about how brokers are scum bags and just want to make a buck. well, if you do that loan... hate to say it but that would back their case up. let them walk away from their current loan and you should walk away from their new loan!!!! |
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Scrooge McDuck
7508 Posts |
Posted - 12/30/2007 : 08:25:58 AM
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karhma damn it. karhma.
it does come back around. and even though times are lean, a new better deal will be delivered to your door when you reject this borrower. |
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darkstar
15821 Posts |
Posted - 12/30/2007 : 08:30:10 AM
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quote:
Originally posted by Scrooge McDuck
karhma damn it. karhma.
it does come back around. and even though times are lean, a new better deal will be delivered to your door when you reject this borrower.
Preach it brother!...
Some may say it's easy for us to ARMchair quarterback this as it's not our deal, but sometimes it takes others to show us our gut was right, which is probably why you posted in the first place, hopefully you wanted confirmation you shouldn't do it...I hope we gave you the strength, if needed, to Just Say No!... |
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1stintegritymort
1289 Posts |
Posted - 12/30/2007 : 08:30:29 AM
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quote:
Originally posted by Mandyvilla
There are certainly many red flags, however, in the day of automated approvals, how deep will they look? Depends on the lender and if only the underwriter must sign off on an AUS - How much is the buyer putting down? That is really the key to this scenario. However, if this scenario was across town, closer to something yada yada, I could see it going through fine OR receiving a counter offer as an investment loan. If he is in an Option ARM, rent just may cover the minimum payment (or what is showing on CR) and we get closer to making sense of this purchase.
As far as breaking a law, I wish someone would say how, because everyone I have quizzed, replies with a blank stare (attorneys). You cannot show fraud on the home the buyer is walking away from - he lived there for 2 years, made timely payments and it got to be too much - having a home go into foreclosure is not a crime. He won't be letting the new purchase go to foreclosure, he needs a (nice) place to live. I think the whole set up stinks and these actions should be criminal, but how?
i don't know if its criminal or not, but ethically, it is wrong. if the current loan goes into foreclosure, couldn't the lender file for a deficiency judgment and put a lien on the new home? |
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jvanpetten
2179 Posts |
Posted - 12/30/2007 : 08:33:28 AM
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| He needs to put his house up for sale, do a short sale and close simo on a new home, maybe not this one if it sells before he has a buyer, but one he can afford. I have not had this come up, but how does a new lender look at the fact he is closing on his current home but on a short sale? Anyone had this come up? |
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benjamin
1634 Posts |
Posted - 12/30/2007 : 08:42:52 AM
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Mandy, did I read your reply correctly? As a retail loan officer for Bank of America, although you are not totally comfortable with this scenario, you would do it for .25 less than the best offer?
What if BoA held current loan? |
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darkstar
15821 Posts |
Posted - 12/30/2007 : 08:53:43 AM
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>>>>I guess if he could afford to keep his current cheapest loan and move into that house it would be a different story, but it's an ARM that's about to pop, so no can do.
Maybe yes can do, did he ask?...Sounds like the perfect scenario to me... |
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TransNet
454 Posts |
Posted - 12/30/2007 : 08:59:51 AM
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quote:
Originally posted by EsMoix
"I see no reason to walk away from the deal, his present mortgage is not my concern."
Tanta at Calculated Risk explains in this comment why his present mortgage is your concern. http://www.haloscan.com/comments/calculatedrisk/1962339236824829396/#373360
"The broker is now in possession of material fact that the proposed lender on the new transaction has a right to know. If the broker does not tell the lender, the broker is party to misrep. If the broker does tell the lender, the loan won't get made."
....
Michelle's (EsMois) post is spot on. There is nothing illegal per se with obtaining a loan to purchase a home and then defaulting on the loan on another property. But it is fraud to withhold a material fact from a lender to influence them to make a loan the lender would not make if they were aware of that fact.
An ethical and prudent mortgage broker would not submit this loan to a lender without disclosing the borrower's intentions to default on their current loan. Before making that disclosure the broker should have first hand knowledge of the scheme. I.e., should not rely on hearsay or innuendo but should ask the borrower directly what their intentions are and try to get it in writing. If the borrower refuses to put in writing that they intend to default on the loan on their current property and they have informed the broker verbally of that intention, the broker should disclose that conversation to the proposed lender, even if the borrower puts it in writing that that is not their intention or they have changed their mind.
If by some coincidence the lender agrees to make the loan with the knowledge that the borrower is going to default on their current loan, the broker should be certain to get some sort of documentation in writing (e.g. an email) from the lender regarding the fact that the lender is aware of the situation. There is no way for the broker to know that someone doesn't remove that documentation from the lender's file at some point leaving the broker to prove that they didn't conspire to defraud the lender.
As mentioned by other posters this loan has another problem with the occupancy. Buying a less expensive home owner-occupied in the same neighborhood is a major obstacle. Going NOO is not an option. That is also fraud since the borrower intends to occupy the property.
To avoid having to process a loan that isn't going to close, the best advice is to just send the borrower an adverse action and steer clear of this land mine. |
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MisterVA
5815 Posts |
Posted - 12/30/2007 : 09:16:47 AM
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quote:
Originally posted by mgraham224
quote:
Originally posted by MisterVA
You will if it becomes a buyback issue.
How does nick have any liability for a mortgage he has done no work on? Or are you talking about the possible new loan?
Let's say that he does the new loan with the knowledge of the borrower's intent to default. And let's say that the new loan is selected for QC and in re-verifying credit, the default shows up for a house in the same neighborhood. And let's say that the address on the 1003 is the same address of the house that is the subject of the default. And let's say there were no mitigating factors about another primary residence loan in the same area. Etc. Would YOU want to take that risk? |
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Coronasteve
1428 Posts |
Posted - 12/30/2007 : 09:55:20 AM
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The 1st paragraph in the OP.
quote:
I got an agreement of sale today from a realtor looking for a prequal on a shortsale , the buyer lives next door , he has a current mortgage for $800,000 on a home he purchase in 2005 with no money down , the home he has under contact is right across the street from his present home , the offer is for $500,000 and it looks like the bank will accept it
I take this to mean that the buyer/borrower lives next door to YOU, the mortgage broker. Echoing the other posts that point out the obvious ethics issues, I might even think that a mortgage fraud or conspiracy to commit mortgage fraud charge could be made because of you(the broker) live next door to the proposed short sale and across the street from the new purchase. This proximity seems too close for comfort for me.
Even with all the far out hypothesizing going on here, If you had to ask this question in the first place, it would seem to me that you pretty much all ready knew the answer.
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Tennis_8
1 Posts |
Posted - 12/30/2007 : 10:06:12 AM
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You might the discussion of this thread enlightening:
http://calculatedrisk.blogspot.com/2007/12/let-short-sale-scams-begin.html |
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jvanpetten
2179 Posts |
Posted - 12/30/2007 : 10:34:58 AM
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| I thought the buyer lived next door to the house he wanted to buy. |
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Coronasteve
1428 Posts |
Posted - 12/30/2007 : 10:41:10 AM
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quote:
Originally posted by jvanpetten
I thought the buyer lived next door to the house he wanted to buy.
This could be the case too, maybe I read it wrong.
But, in any case, with the publicity now on this thread.... |
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toddblue
1806 Posts |
Posted - 12/30/2007 : 11:02:13 AM
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On the 1003, What would you put for the disposition of the properties on the Schedule of REO? Sold, Pending Sale, Rental, Retained Property?
If you did not put the informaion you know is correct, you would be a party to fraud. |
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jvanpetten
2179 Posts |
Posted - 12/30/2007 : 11:05:04 AM
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| I would tell the borrower to put his house up for sale and do a short sale before buying another home. It could be a simo closing. EVERYONE KNOWING what is going on. I have not had this come up, so don't know if a short sale will kill the deal/deals or not. |
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velecico
3214 Posts |
Posted - 12/30/2007 : 11:10:49 AM
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| So you disclose to the new lender that the borrowers will default on his first mortgage loan , borrower gets turned down and sues you and the new mortgage company based on what you said , borrower claims he had no intention to default , was presenting a " what if scenario " so now borrower goes to another lender , says he will rent present home and move into less expensive home , see , its not as easy as you think , I even spoke to a few wholesale reps , nothing on the 1003 ask for someones " future " intentions , do you intend to walk away from your child support , your car payment ? does the new lender ask if maybe you plan to leave your present job to start a new company ? you can intend something one day and change your mind the next ,the facts are that he has a current loan and current credit history and sufficent income and assetts , everything is out on the table , so even if the borrower wrote a letter , said " here is my situation , I have this loan , will not be able to afford it when it resets , if I cant rent it or start making more money in the next 9-12 months it will go into foreclosure " , how do you know the new lender turn him down , a lending decession is based on your present economic situation and past payment history not something that may happen in the future |
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darkstar
15821 Posts |
Posted - 12/30/2007 : 11:17:40 AM
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quote:
Originally posted by velecico
So you disclose to the new lender that the borrowers will default on his new loan , borrower gets turned down and sues you and the new mortgage company based on what you said , borrower claims he had no intention to default , so now borrower goes to another lender , says he will rent present home out to move into less expensive home , see , its not as easy as you think , I even spoke to a few wholesale reps , nothing on the 1003 ask for someones " future " intentions , do you intend to walk away from your child support , your car payment ? you can intend something one day and change your mind the next ,the facts are that he has a current loan and current credit history and sufficent income and assetts , everything is out on the table , so even if the borrower wrote a letter , said " here is my situation , I have this loan , will not be able to afford it when it resets , if I cant rent it or start making more money in the next 9-12 months it will go into foreclosure " , how do you know the new lender turn him down ?
"IF" the borrower can document the adjustments will be unaffordable, he is in a good position to FORCE his current lender to modify the loan BALANCE, forget the rate for the moment, however, being he can go full doc, I doubt he will be able to prove that...I think he just wants out of paying 800K when the next person can buy that one(the same style I'm assuming) for 500K...Reasonable desire, just takes work to accomplish...He can accomplish his goal, he has to play hardball and do it the right way, again, call me if you want to know how... |
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MisterVA
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