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stbmortgage
70 Posts |
 Posted - 05/31/2008 : 8:56:01 PM
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Is it legal for the seller to give the purchaser cash back at the closing of a mortgage loan? My research indicates that it is illegal.
Thanks everyone for all of the comments on this topic. Too many times in this profession 'follow the leader' has been the mantra regardless of where he or she is going. If more of us had bothered to learn the consequences and implications to the borrower of the various loan programs, the mortgage mess would not be as bad or focused so much on our industry. Instead, the contribution to the meltdown that can be attributed to the massive job losses being experienced by many in this country would be the focus. |
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MortgageBoarder
4016 Posts |
Posted - 05/31/2008 : 9:04:28 PM
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| A buyer may not receive any credits at closing, that is the law. |
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:14:24 PM
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| The most cash the buyer can walk away from closing with is the amount of earnest money they gave before closing. No earnest money = the buyer cannot walk away from closing with a penny. The seller can pay for the closing costs, but no more |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 9:25:39 PM
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| I have a client who is trying to be convinced that this is legal by the seller and a mortgage investor friend of his. I told them that I would have to walk away from the transaction if he continued along this path with the seller. Also, the seller could just not give him anything, right? |
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:29:03 PM
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| I do not understand your question. Of course the seller can choose NOT to pay any of the buyers closing costs, or they can pay as much of the closing costs as allowed by the lender based on the LTV and loan program. If the buyer paid earnest money, then this amount is the most cash they could walk away from closing with - nothing more. There is no gray area here - the seller cannot simply give cash to the buyer. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 9:30:07 PM
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quote:
Originally posted by stbmortgage
Is it legal for the seller to give the purchaser cash back at the closing of a mortgage loan? My research indicates that it is illegal.
No! Your research is correct.
It is totally illegal for the seller to give the purchaser cash back at the closing of a mortgage loan for almost any reason.
However, there is one legal way to transfer potential stored equity outside of the real estate transaction. It's not a cash back, but actually cash up front in the form of a paycheck, that is taxable to the buyer.
check out this link http://www.dpguy.com/downpaymentguy/mkt/sellers/default.asp?idMember=901 |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 9:32:01 PM
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| What I meant was that even if they try to cut a deal behind the lenders back- the seller does not have to honor any outside arrangement that they may have and the purchaser would have no recourse. |
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:40:05 PM
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quote:
Originally posted by stbmortgage
What I meant was that even if they try to cut a deal behind the lenders back- the seller does not have to honor any outside arrangement that they may have and the purchaser would have no recourse.
If the seller is giving money to the buyer as part of the purchase transaction, then it must be included in the purchase contract and listed on the HUD settlement statement at closing. The lender reviews both the purchase contract and HUD before closing, so they would know about any legitimate money being given from the seller to the buyer (in the form of seller concessions to pay some or all of the closing costs).
If the buyer and seller have a separate agreement for the seller to give money to the buyer as part of the purchase transaction, then you have the situation of a contract that cannot be enforced (since it is not part of the official purchase contract) and/or you have multiple parties (including at least the buyer and seller) guilty of mortgage fraud, since they are trying to keep this arrangement hidden from the lender and the closing attorney - thus they are breaking multiple state and federal laws. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 9:42:03 PM
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quote:
Originally posted by stbmortgage
What I meant was that even if they try to cut a deal behind the lenders back- the seller does not have to honor any outside arrangement that they may have and the purchaser would have no recourse.
Sherry, Sam is 100% correct but you should be made aware of a way that is a legal way for the buyer to receive the cash as a pay check that is taxable up to two or three weeks before the transaction.
It is not behind the lenders back, and it is fully disclosed. There are protections in place to assure the seller honors their agreements and it will appear on the HUD and is not considered a seller concession.
Additionally, the seller will receive benefits that enable them to get back all of their money and more over the time of the membership they purchase.
The guy who knows this program is Marlo Newman at 877-374-8941 or visit http://www.TheDownPaymentGuyNetwork.com
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:43:58 PM
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quote:
Originally posted by d_damiano
Sherry, there is a legal way for the buyer to receive the cash as a paycheck that is taxable up to two or three weeks before the transaction.
This may technically be legal, but good luck getting this through underwriting... |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 9:46:34 PM
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quote:
Originally posted by EquitySmart
quote:
Originally posted by stbmortgage
What I meant was that even if they try to cut a deal behind the lenders back- the seller does not have to honor any outside arrangement that they may have and the purchaser would have no recourse.
If the seller is giving money to the buyer as part of the purchase transaction, then it must be included in the purchase contract and listed on the HUD settlement statement at closing. The lender reviews both the purchase contract and HUD before closing, so they would know about any legitimate money being given from the seller to the buyer (in the form of seller concessions to pay some or all of the closing costs).
If the buyer and seller have a separate agreement for the seller to give money to the buyer as part of the purchase transaction, then you have the situation of a contract that cannot be enforced (since it is not part of the official purchase contract) and/or you have multiple parties (including at least the buyer and seller) guilty of mortgage fraud, since they are trying to keep this arrangement hidden from the lender and the closing attorney - thus they are breaking multiple state and federal laws.
You have just verified what I have been trying to tell him- that an outside transaction whereby he receives money from the seller is FRAUD. |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 9:50:42 PM
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quote:
Originally posted by d_damiano
quote:
Originally posted by stbmortgage
What I meant was that even if they try to cut a deal behind the lenders back- the seller does not have to honor any outside arrangement that they may have and the purchaser would have no recourse.
Sherry, there is a legal way for the buyer to receive the cash as a pay check that is taxable up to two or three weeks before the transaction.
It is not behind the lenders back, and it is fully disclosed. There are protections in place to assure the seller honors their agreements and it will appear on the HUD and is not considered a seller concession.
Additionally, the seller will receive benefits that enable them to get back all of their money and more over the time of the membership they purchase.
The guy who knows this program is Marlo Newman at 877-374-8941 or visit http://www.TheDownPaymentGuyNetwork.com
I went to the site. They are not talking about any down payment help. They are just wanting to sell the house at a higher value than the market can produce at this time. I feel that someone has devised another way to keep prices in certain area high in order to justify asking prices. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 9:51:16 PM
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quote:
Originally posted by EquitySmart
quote:
Originally posted by d_damiano
Sherry, there is a legal way for the buyer to receive the cash as a paycheck that is taxable up to two or three weeks before the transaction.
This may technically be legal, but good luck getting this through underwriting...
Sam there is no problem getting it through underwriting for 4 reasons:
1. It is a real job, totally legal with a great product that is being sold for less than what it is worth, with a real commission check.
2. It is not a seller concession nor interested party contribution, but personal property that does not convey with the property.
3. You are not using this part time income to qualify for the home loan (No DTI) but the asset (The commission paycheck) is fully sourced and verified and the loan officer receives a VOD and a VOE
4. It is against the Law (Federal Equal Credit Opportunity Act) for any underwriter to discriminate against anyone’s part time income. |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 9:55:33 PM
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quote:
Originally posted by d_damiano
quote:
Originally posted by EquitySmart
quote:
Originally posted by d_damiano
Sherry, there is a legal way for the buyer to receive the cash as a paycheck that is taxable up to two or three weeks before the transaction.
This may technically be legal, but good luck getting this through underwriting...
Sam there is no problem getting it through underwriting for 4 reasons:
1. It is totally legal and a great product that is being sold for less than what it is worth, with a real commission check.
2. It is not a seller concession nor Interested party contribution, but personal property that does not convey with the property.
3. You are not useing this part time income to qualify for the home loan (No DTI) but the asset (The commission paycheck) is fully sourced and verified and the loan officer recieves a VOD and a VOE
4. It is against the Law (Federal Equal Credit Opportunity Act)to discrimate against anyones part time income.
But don't most lenders require that the part-time income be in force for at least 2 years in order to qualify? |
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:57:11 PM
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quote:
Originally posted by stbmortgage
You have just verified what I have been trying to tell him- that an outside transaction whereby he receives money from the seller is FRAUD.
Tell the buyer that if he is getting money from the seller from the purchase contract, then he should find a good defense attorney ASAP and you will no longer be able to help him with the loan. Also document your conversation with THOROUGH notes that you keep in your internal file, just in case something comes up later that you may be forced to get involved... ALWAYS protect yourself against any potential fraud. |
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 9:59:36 PM
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quote:
Originally posted by d_damiano
Sam there is no problem getting it through underwriting for 4 reasons:
No offense, but these 4 reasons sound like complete BS (though I am no expert)
As I said, good luck convincing the underwriter everything is kosher with this... |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:00:03 PM
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You wrote:
"I went to the site. They are not talking about any down payment help. They just want to sell the house at a higher value than the market can produce at this time. I feel that someone has devised another way to keep prices in certain area high in order to justify asking prices."
The Income earned for selling the membership does not have to be used for a down payment. It does not matter how you use your paycheck, you can use it for down payment, reserves, buy downs, fixing up the house, going on vacation, and what ever you want. The last I heard other than if you had garnishments or child support no one had any right to tell you how to spend your paycheck.
Your comment "I feel that someone has devised another way to keep prices in certain area high in order to justify asking prices".
It is well... naive and ridiculous.
Every property goes through an appraisal process that has nothing to do with these memberships, the appraisal will set the value. If the seller chooses to purchase something of value to them either before they sell their house or after they sell their house out of the proceeds of the sale that is their choice.
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 10:01:02 PM
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quote:
Originally posted by EquitySmart
quote:
Originally posted by stbmortgage
You have just verified what I have been trying to tell him- that an outside transaction whereby he receives money from the seller is FRAUD.
Tell the buyer that if he is getting money from the seller from the purchase contract, then he should find a good defense attorney ASAP and you will no longer be able to help him with the loan. Also document your conversation with THOROUGH notes that you keep in your internal file, just in case something comes up later that you may be forced to get involved... ALWAYS protect yourself against any potential fraud.
I will do that. Also, I used to live in Atlanta. Why aren't you at Beluga or somewhere tonight? |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:07:14 PM
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sherry wrote:
"But don't most lenders require that the part-time income be in force for at least 2 years in order to qualify?"
Simple answer here, you are not using the part time income to qualify. You can't they have not been on the job long enough.
But the money they earn (which is a sourced and verified asset) can be used for down payment, paying off existing debt, buying down a rate, fixing up the house, reserves, and my favorite, putting this income aside in a trust to pay off 1 year of HOA fees or 3-6-12 months of mortgage payments |
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MARKJOLLIFF
393 Posts |
Posted - 05/31/2008 : 10:08:52 PM
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| I've seen quite a few deals like this. They really screw up comps when doing an appraisal. It goes like this. Property was listed for 400k for say 6 weeks. all of a sudden property sells for 500k and MLS was changed to 500k list price with 1 day on market. 100k goes back to buyer. I've called agents and was told everything was disclosed even though requests were made to keep the details in a side agreement. Agents were very nervous when questioned. sellers go along because they get the same amount at closing. When asked how the property appraised for 500k when they had it priced right for the market originally the reply was "They had their own appraiser.' Cash back was not disclosed in MLs listing.Agents said the cash back was for repairs. I have NO idea how these deals went thru! Thats why it's important to know your markets or someone will come in and use these sales as comps. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:12:28 PM
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quote:
Originally posted by EquitySmart
quote:
Originally posted by d_damiano
Sam there is no problem getting it through underwriting for 4 reasons:
No offense, but these 4 reasons sound like complete BS (though I am no expert)
As I said, good luck convincing the underwriter everything is kosher with this...
Sam as you said you are no expert ;)
They are not BS at all, totally legit, and 100% parve Kosher :)
As far as convincing an underwriter, that's why I'm a member of the network anytime I have run into difficulties, I just turn it over to Marlo and shows the underwriters that it is Kosher.
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 10:20:24 PM
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quote:
Originally posted by MARKJOLLIFF
I've seen quite a few deals like this. They really screw up comps when doing an appraisal. It goes like this. Property was listed for 400k for say 6 weeks. all of a sudden property sells for 500k and MLS was changed to 500k list price with 1 day on market. 100k goes back to buyer. I've called agents and was told everything was disclosed even though requests were made to keep the details in a side agreement. Agents were very nervous when questioned. sellers go along because they get the same amount at closing. When asked how the property appraised for 500k when they had it priced right for the market originally the reply was "They had their own appraiser.' Cash back was not disclosed in MLs listing.Agents said the cash back was for repairs. I have NO idea how these deals went thru! Thats why it's important to know your markets or someone will come in and use these sales as comps.
As I said before- it seems as though there may be an effort to keep prices elevated in certain areas. This particular one is an exclusive area, but sales have slowed considerably. The home has been on the market for some time according to my client. This may be the tip of a huge iceberg and I'm not going to be on it when it begins to melt. My former broker always went down the list of approved appraisers and used each one in order.
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:23:48 PM
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quote:
Originally posted by MARKJOLLIFF
I've seen quite a few deals like this. They really screw up comps when doing an appraisal. It goes like this. Property was listed for 400k for say 6 weeks. all of a sudden property sells for 500k and MLS was changed to 500k list price with 1 day on market. 100k goes back to buyer. I've called agents and was told everything was disclosed even though requests were made to keep the details in a side agreement. Agents were very nervous when questioned. sellers go along because they get the same amount at closing. When asked how the property appraised for 500k when they had it priced right for the market originally the reply was "They had their own appraiser.' Cash back was not disclosed in MLs listing.Agents said the cash back was for repairs. I have NO idea how these deals went thru! Thats why it's important to know your markets or someone will come in and use these sales as comps.
Mark what you are describing is 100% fraud and not at all what I am talking about, please don't confuse the two.
The entire Cuomo agreement with Fannie and Freddie is exactly to stop this kind of fraud.
What I am talking about is a seller selling their home for the appraised value (please note the real appraised value not some trumped up fraudulent value) and being interested in becoming a member in the largest association of property owners in America and receiving benefits that are worth more than what they paid for it.
There is nothing artificial inflating the property value, in fact it's as actual as it gets and thank goodness someone is doing something about it. In fact as the largest trade association of property owners it is part of their mission to help raise property values for their members, as well as help them on property tax issues, eminent domain issues and more.
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fsboguy
3664 Posts |
Posted - 05/31/2008 : 10:33:13 PM
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| Too many late night infomercials. NO! |
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stbmortgage
70 Posts |
Posted - 05/31/2008 : 10:40:59 PM
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quote:
Originally posted by d_damiano
You wrote:
"I went to the site. They are not talking about any down payment help. They just want to sell the house at a higher value than the market can produce at this time. I feel that someone has devised another way to keep prices in certain area high in order to justify asking prices."
The Income earned for selling the membership does not have to be used for a down payment. It does not matter how you use your paycheck, you can use it for down payment, reserves, buy downs, fixing up the house, going on vacation, and what ever you want. The last I heard other than if you had garnishments or child support no one had any right to tell you how to spend your paycheck.
Your comment "I feel that someone has devised another way to keep prices in certain area high in order to justify asking prices".
It is well... naive and ridiculous.
Every property goes through an appraisal process that has nothing to do with these memberships, the appraisal will set the value. If the seller chooses to purchase something of value to them either before they sell their house or after they sell their house out of the proceeds of the sale that is their choice.
Value based upon sales prices in the area. If these types of transactions increase in this area, of course the appraisal can come back higher- the comps have been raised artificially. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:41:56 PM
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quote:
Originally posted by fsboguy
Too many late night infomercials. NO!
Probably yes, but I was just trying to show Sherry a legal way of doing a transaction, which would
A. Let her keep the clients
B. Stop mortgage fraud and anyone having to go to jail
Then other questions were raised and I did not want anyone to be confused.
Bottom line, Knowledge is king and we are in a business right now (with all the changes) where in order to be succesful you need to not only know the guidelines better than the underwriters, but how to structure deals so they can close.
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EquitySmart
1240 Posts |
Posted - 05/31/2008 : 10:49:58 PM
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quote:
Originally posted by d_damiano
Bottom line, Knowledge is king and we are in a business right now (with all the changes) where in order to be succesful you need to not only know the guidelines better than the underwriters, but how to structure deals so they can close.
You also need to know when to stay far away from a transaction that seems fishy. I really like the words of wisdom stbmortgage so eloquently said earlier:
This may be the tip of a huge iceberg and I'm not going to be on it when it begins to melt.
d_damiano - if you understand and believe in this service, why do you have to refer these loans to a coworker? Why don't you learn how to finish them yourself? |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 10:59:36 PM
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[/quote]
Value based upon sales prices in the area. If these types of transactions increase in this area, of course the appraisal can come back higher- the comps have been raised artificially.
[/quote]
Huh? Maybe I'm confusing two different topics your specific scenario and scenarios in general.
I'll try to answer your question, but if I guess wrong, please clarify
These types of transactions are in all areas not any one area.
If you are referring to the one specific transaction in question and know for a fact that some thing doesn’t smell right, that’s different.
If you are referring to a way to legally accomplish the goal of both the buyer and the seller and want to help them from doing something stupid or illegal than please proceed.
The company has every legal right to be in the marketplace and therefore is part of the marketplace, if they affect the supply and demand side of the equation, that's how markets work and there is nothing artificial about it.
The only way the price would be affected artificially would be if there was some magical mystery force outside of the market that could effect change - like fraud.
But if a company is a legitimate part of the marketplace they are not artificially inflating anything and in fact they are actually helping to improve values, and they have every right to do so. As far as I'm concerned thank goodness they exist, if we left it up to the regulators we will have nothing more than lower property values and more foreclosures.
It would be no different than a big company opening a big new plant in a city; it actually affects the values going up. A trade association that works to not only protect property owners, gets them discounts on goods and services and helps to raise property values is a welcome addition to our industry as far as I'm concerned.
There is nothing artificial, magical or mystical about it, just something new that we need to make room and adjust for.
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MortgageBoarder
4016 Posts |
Posted - 05/31/2008 : 11:03:21 PM
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Dude it's a little obvious how passionate you have become about this system, you can't seem to stop convincing yourself that this as great as sliced bread. Snap back into reality already!! 
quote:
Originally posted by d_damiano
quote:
Originally posted by MARKJOLLIFF
I've seen quite a few deals like this. They really screw up comps when doing an appraisal. It goes like this. Property was listed for 400k for say 6 weeks. all of a sudden property sells for 500k and MLS was changed to 500k list price with 1 day on market. 100k goes back to buyer. I've called agents and was told everything was disclosed even though requests were made to keep the details in a side agreement. Agents were very nervous when questioned. sellers go along because they get the same amount at closing. When asked how the property appraised for 500k when they had it priced right for the market originally the reply was "They had their own appraiser.' Cash back was not disclosed in MLs listing.Agents said the cash back was for repairs. I have NO idea how these deals went thru! Thats why it's important to know your markets or someone will come in and use these sales as comps.
Mark what you are describing is 100% fraud and not at all what I am talking about, please don't confuse the two.
The entire Cuomo agreement with Fannie and Freddie is exactly to stop this kind of fraud.
What I am talking about is a seller selling their home for the appraised value (please note the real appraised value not some trumped up fraudulent value) and being interested in becoming a member in the largest association of property owners in America and receiving benefits that are worth more than what they paid for it.
There is nothing artificial inflating the property value, in fact it's as actual as it gets and thank goodness someone is doing something about it. In fact as the largest trade association of property owners it is part of their mission to help raise property values for their members, as well as help them on property tax issues, eminent domain issues and more.
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d_damiano
551 Posts |
Posted - 05/31/2008 : 11:03:41 PM
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Sam, you wrote:
d_damiano - if you understand and believe in this service, why do you have to refer these loans to a coworker? Why don't you learn how to finish them yourself?
[/quote]
You mis-understand, I do these loans now and finish them myself many times a month. I don't own the service or sell it, I just use it to close more loans.
My reference was to the guys who promote, train and coach loan officers and realtors how to use the service if she was interested in learning more. That's all.
And I do agree if that particular deal is fishy, run for the hills, but if it is just misguided or uninformed buyers and sellers, show them a better and legal way. That's our job right? I mean isn't that the job of a competent professional, it's not like the bank is going to show people how to do it.
Frankly, I'm tired of always being thrown in with the assumption as an industry that we are promoting mortgage fraud, all of the professionals I work with are the exact opposite and nothing could be further from the truth. I also think we have an equal responsability to eliminate potential fraud as well when we come accross it.
If that means we can teach people the right way to do things, instead of the wrong way, that's what I call not only our value but our expertise as well. |
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d_damiano
551 Posts |
Posted - 05/31/2008 : 11:07:16 PM
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[quote]Originally posted by MortgageBoarder
Dude it's a little obvious how passionate you have become about this system, you can't seem to stop convincing yourself that this as great as sliced bread. Snap back into reality already!!
[quote]
Thanks Justin :)
You are right, just another late night ramble. I really do need to get a better life and break my BO addiction.
It's off to bed and hopefully convincing the wife I can be passionate about something else too.
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MortgageBoarder
4016 Posts |
Posted - 06/01/2008 : 10:05:55 AM
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| Dennis you have invisibly bumped this post like 10+ times since your last reply... what is your deal dude? |
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d_damiano
551 Posts |
Posted - 06/01/2008 : 10:19:19 AM
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quote:
Originally posted by MortgageBoarder
Dennis you have invisibly bumped this post like 10+ times since your last reply... what is your deal dude?
Just fixing typos and spelling mistakes from the middle of the night, unfortunately when you post on a discussion board it sometimes stays on the internet for years.
I would not want my clients to appreciate how illiterate I can sometimes be.
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MortgageBoarder
4016 Posts |
Posted - 06/01/2008 : 10:21:03 AM
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| HAHA... I like your honest answers. |
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d_damiano
551 Posts |
Posted - 06/01/2008 : 10:48:42 AM
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quote:
Originally posted by MortgageBoarder
HAHA... I like your honest answers.
Justin have you noticed the Active Rain has been offline for about 12 hours now? |
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MortgageBoarder
4016 Posts |
Posted - 06/01/2008 : 10:59:49 AM
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| Nope... I don't check on it as much as I should, maybe like every other day if that. |
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lucky1s
3618 Posts |
Posted - 06/01/2008 : 11:19:03 AM
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What ***** is that most lender swont allow even the teeniest credit for repairs on the hud virtually forcing the parties to deal outside of close.
How many times have you had a lender ask you to chanjge the hud to get funds and "deal with it POC"?
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cspatmon
2142 Posts |
Posted - 06/01/2008 : 11:28:11 AM
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| Unless it's a 3-party transaction it's illegal. Investor/Seller/Buyer. |
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djorge44
1571 Posts |
Posted - 06/01/2008 : 3:14:11 PM
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| If you want funds for repairs use FHA 203K |
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d_damiano
551 Posts |
Posted - 06/01/2008 : 3:31:09 PM
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quote:
Originally posted by cspatmon
Unless it's a 3-party transaction it's illegal. Investor/Seller/Buyer.
Cecelia Exactly!
And I would like to add to that that you need to make sure the 3-party transaction you are using is the real deal and has value.
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bobabrahamson
86 Posts |
Posted - 06/01/2008 : 6:34:18 PM
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| After reading all the way through this, does anybody else wonder why we have gotten the reputation we have? |
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kellamtom
633 Posts |
Posted - 06/01/2008 : 7:43:55 PM
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what about a fha 203k rehab or streamline to make improvements
and any other type of loan the buyer could receive any earnest money back and if they poc for an appraisal the cost of that |
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slants
4274 Posts |
Posted - 06/01/2008 : 8:24:19 PM
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quote:
Originally posted by kellamtom
what about a fha 203k rehab or streamline to make improvements
and any other type of loan the buyer could receive any earnest money back and if they poc for an appraisal the cost of that
That is included in the loan amount from the lender and the buyer is qualifying with the future value of the property as collateral to borrow the money of his own accord, not getting it from the seller as a rebate. |
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Corn
39 Posts |
Posted - 06/02/2008 : 10:34:06 AM
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quote:
Originally posted by d_damiano
quote:
Originally posted by EquitySmart
quote:
Originally posted by d_damiano
Sherry, there is a legal way for the buyer to receive the cash as a paycheck that is taxable up to two or three weeks before the transaction.
This may technically be legal, but good luck getting this through underwriting...
Sam there is no problem getting it through underwriting for 4 reasons:
1. It is a real job, totally legal with a great product that is being sold for less than what it is worth, with a real commission check.
2. It is not a seller concession nor interested party contribution, but personal property that does not convey with the property.
3. You are not using this part time income to qualify for the home loan (No DTI) but the asset (The commission paycheck) is fully sourced and verified and the loan officer receives a VOD and a VOE
4. It is against the Law (Federal Equal Credit Opportunity Act) for any underwriter to discriminate against anyone’s part time income.
I can guarantee you my employer does not allow this. Just try sue on the grounds of violating the ECOA and see how fast your suit will get dismissed. The bottom line, we consider these types of downpayment assistance schemes (ie, Owners Alliance) to be sales price and/or asset fraud. These scams are easy to spot and the fact that the participants try to hide the truth is evidence enough of the intention to deceive. Rarely is the original purchasge agreement with the original purchase price disclosed to the lender. No, it is usually a purchase agreement drafted after the subject has been appraised and the purchase price "renegotiated" without any reference made to the original terms of the purchase. Sometimes an honest and/or naive realtor feeling uncomfortable with the scheme will draft up an addendum raising the purchase price but there's always the same clue about the true facts of the purchase included on those addendums: The realtor commission will be based on the original purchase price, not the renegotiated price.
Also, what happens to the "commission" paid to the borrower if the purchase transaction does not close? I bet he/she doesn't get to keep it, therefore the monies paid prior to closing is simply a loan against a future commission. We only allow seasoned or gifted assets, not borrowed assets. Sorry. |
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d_damiano
551 Posts |
Posted - 06/02/2008 : 12:10:37 PM
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quote:
Originally posted by Corn
I can guarantee you my employer does not allow this. Just try sue on the grounds of violating the ECOA and see how fast your suit will get dismissed. The bottom line, we consider these types of downpayment assistance schemes (ie, Owners Alliance) to be sales price and/or asset fraud. These scams are easy to spot and the fact that the participants try to hide the truth is evidence enough of the intention to deceive. Rarely is the original purchasge agreement with the original purchase price disclosed to the lender. No, it is usually a purchase agreement drafted after the subject has been appraised and the purchase price "renegotiated" without any reference made to the original terms of the purchase. Sometimes an honest and/or naive realtor feeling uncomfortable with the scheme will draft up an addendum raising the purchase price but there's always the same clue about the true facts of the purchase included on those addendums: The realtor commission will be based on the original purchase price, not the renegotiated price.
Also, what happens to the "commission" paid to the borrower if the purchase transaction does not close? I bet he/she doesn't get to keep it, therefore the monies paid prior to closing is simply a loan against a future commission. We only allow seasoned or gifted assets, not lent assets. Sorry.
Corn:
What bank do you work for?
You wrote: I can guarantee you my employer does not allow this.
What position do you have with the bank and does your guarantee mean anything?
Are you speaking in a public platform with a personal opinion or on an official basis?
When you write - we consider these types of downpayment assistance schemes (ie, Owners Alliance) to be sales price and/or asset fraud
Who specifically is we?
You wrote -Just try sue on the grounds of violating the ECOA and see how fast your suit will get dismissed.
Are you expressing an opinion as a lawyer or are you a judge?
What is it that you think gives you the right to say a legitimate company is a scam?
Why would you say the fact that the participants try to hide the truth is evidence enough of the intention to deceive.
What makes you think anyone is trying to hide anything
The job is disclosed on the 1003, The income is verified by the bank with a VOD and a VOE, if the sellers pays for their membership at close it appears on the HUD (no one is hiding anything)
You then stated Rarely is the original purchasge agreement with the original purchase price disclosed to the lender.
How many of these have you seen or done? I have never had this issue to be true.
You asked: Also, what happens to the "commission" paid to the borrower if the purchase transaction does not close?
The commision paid has nothing to do with the purchase transaction.
A salesperson gets paid for selling a membership, if the membership does not get paid, then no sale took place. In which case the same thing that happens in every other company in America, when a sales does not take place there is no commision.
If the comission has been advanced it it's returned.
Your coments seem to all follow the belief that a properties value is being fraudently raised in order to cover the cost of the membership.
The reality is this is not happening in any of the deals I have been involved in. If this is happening and values are being raised above appraised values, or aparaised values are fraudulent, that is fraud and an entirety different issue.
I am confident not one I know is interested in getting involved with anything fraudulent at any level. When a property is at a fair appraised value, there is nothing wrong with a seller buying a membership of value if he choose to do so. Additionally, I doubt anyone has any difficulty with job creation and earning extra money.
It's easy to blow smoke on a discussion board, and everyone is entitled to an opinion, it will be interesting to see the Banks real position once properly educated.
Let me know who you would like me to submit a loan to?
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MortgageBoarder
4016 Posts |
Posted - 06/02/2008 : 3:39:32 PM
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Great D.. Are you going to keep re-bumping this until someone else disagrees with you, so you can keep convincing yourself and everyone on here that this is a solid program that every lender will accept once you, or your colleague, convinces and or makes the UW understand how this program works?
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d_damiano
551 Posts |
Posted - 06/02/2008 : 4:05:17 PM
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quote:
Originally posted by MortgageBoarder
Great D.. Are you going to keep re-bumping this until someone else disagrees with you, so you can keep convincing yourself and everyone on here that this is a solid program that every lender will accept once you, or your colleague, convinces and or makes the UW understand how this program works?
Justin, I'm auditioning for the title of the Bump master!
Now that is something I would love to convince myself of or better yet the wife :)
Thanks for keeping score ;0 and your now official title as the bump police.
Or since you are on here as many late nights like me maybe it's the opposite of bumplestilskin
Buy really, I’m just fixing typos...I could not care less about the bumps. What I do care about is someone reading these months down the road and in my haste the post is filled with bad information or typos that's all.
As far as convincing underwriters for me it's really pretty simple the law is the law!
Frankly, I'm getting tired of the fight. With all the changes we have had to endure in the last year, and so many underwriters trying to make up the rules as they go, not to mention the wanna be attorneys, it’s amazing we are getting real work done at all.
For me its simple, either a loan is insurable or it's not. (HUD DPA’s specifically are)
A loan is a good risk, an appropriately priced for risk or a bad risk loan.
A job is a job or it's not.
Reasonable proof makes sense, being risk adverse makes sense, squashing innovation because someone does not like it does not.
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mortgagewithme
193 Posts |
Posted - 06/02/2008 : 4:17:06 PM
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quote:
Originally posted by bobabrahamson
After reading all the way through this, does anybody else wonder why we have gotten the reputation we have?
I love Step 1: Don't Reduce the Price, Step 2: Determine Your Bottom Line. Kinda contradicting isn't it?
If it smells funny, it's probably rotten
I give this "legal" program about as much life as the DPA's have left.
What your buyer and seller are suggesting is absolutely FRAUD.. if I were you, I would run from this potential explosion, do not pass go, and do not collect your $200.
d_damiano, I see you're a Certified Down Payment Guy Mortgage Advisor. Congratulations, I guess that explains why you're so passionate about this "legitimate company" |
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Corn
39 Posts |
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