Real Estate Fraud: Real Estate Broker Takes The Home But Not The Mortgage
Added July 30, 2009 by Ilyce R. Glink
Summary: How do you know if you're the victim of a real estate fraud, a housing scam or mortgage fraud? A reader listed his house for sale with an investor who was also a Realtor. The investor/Realtor transferred ownership of the homeowner's property to himself using a quit claim deed, but left the homeowner on the hook for the mortgage. Is he the victim of a housing scam or mortgage fraud?
Q: I entered into an agreement with an investor/Realtor in 2006 where he was supposed to purchase my home and pay off my loan if he was unable to sell my home in 12 months. It has been three years, and he hasn’t sold my home. Not only that, this person has also placed the title of my home in his name using a quit claim deed but left the mortgage in my name. What can I do?
A: Honestly, I can’t believe it has taken you three years to reach out and ask for help. The moment the so-called investor/Realtor asked you to put the title to the property in his name using a quit claim deed but keep the mortgage in yours, you should have refused and immediately picked up the phone to call the police or the FBI.
What I’m trying to say is you've been scammed. What you describe is a classic mortgage fraud scenario.
Housing Scams and Mortgage Fraud Grew in 2008
But you're not the only victim of a housing scam or mortgage fraud. According to the FBI's 2008 Mortgage Fraud Report, the recession has only increased the number of housing scams and mortgage fraud taking place in the U.S. Here are some of the highlights of the latest report on housing scams and mortgage fraud from the FBI:
1. Mortgage fraud continued to be an escalating problem in the United States during 2008. Although no central repository exists for collecting mortgage fraud complaints, virtually all law enforcement and industry statistics indicated an upswing in mortgage fraud activity. The number of mortgage fraud filings from financial institutions increased 36 percent to 63,713 and while the total dollar loss attributed to mortgage fraud is unknown; at least 63 percent (1,035) of all pending FBI mortgage fraud investigations during FY2008 involved dollar losses totaling more than $1 million.
2. A decrease in loan originations and an increase in defaults and foreclosures continued to dominate the downward trend in the housing market in 2008. While the amount of mortgage fraud cannot be precisely determined, industry experts agree that there is a direct correlation between fraud and distressed real estate markets. As the housing market continued to decline in response to an increase in housing inventories, lack of sales, and new foreclosures surface, to include a wave of Alt-A and Option ARM loans due to reset beginning in April 2009, real estate values softened, and fraud reporting increased throughout 2008.
3. Mortgage fraud is higher in states where unemployment and foreclosures are surging. Analysis of available law enforcement and industry information indicates the top states for mortgage fraud during 2008 were California, Florida, Georgia, Illinois, Michigan, Arizona, Texas, Maryland, Missouri, New Jersey, New York, Ohio, Colorado, Nevada, Minnesota, Rhode Island, Massachusetts, Pennsylvania, Virginia, and the District of Columbia. Rhode Island, Massachusetts, Pennsylvania, and the District of Columbia were new to the list in 2008, replacing Utah, Indiana, Tennessee and Connecticut from 2007.
4. The downward trend in the housing market during 2008 provided a favorable climate for mortgage fraud schemes to proliferate. Several of these schemes have the potential to spread if the current economic downward trend, as expected, continues beyond 2009. Increases in foreclosures, declining housing prices, and decreased demand place pressure on lenders, builders, and home sellers. These and other market participants are perpetuating and modifying old schemes, including property flipping, builder-bailouts, short sales, and foreclosure rescues. Additionally, they are facilitating new schemes, including reverse mortgage fraud, credit enhancements, condo conversion, loan modifications, and pump and pay in response to tighter lending practices.
Contact an attorney immediately to see where you are with this, if the investor/Realtor has taken out another loan for the property, and if you can resolve the situation or need to take legal action.
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(View All Topics)IRS consumer advice credit credit history credit report fraud home buying identity theft ilyce glink mortgage mortgage lenders personal finance advice real estate scam taxes
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Comments
Michigan Mortgage says
Hi Ilyce i read your article about mortgage fraud or another housing scam. good artictle but what part of the realtor/investor taking ownership of the property by quitclaim deed is fraud? If the homeowner agrees to sign the property over because he or she wasnt able to pay the mortgage wouldnt almost be a favor to the homeowner to transfer ownership instead of loosing the property to foreclosure? Please explain im confused. Thanks Love your articles
Ilyce says
THe fraud part is that the REaltor took over the ownership of the property, but not the responsibility of the mortgage. Essentially, he took the asset with out the liability (a violation of the owner's mortgage agreement). This is a well-known mortgage fraud scam, where the scamster purports to help out the owner and then makes off with the asset - leaving the seller with the liability. Why would he do that? There's no reason other than to make off with the equity of the property.
Michigan Mortgage says
ok is that related to the due on sales clause? WOW...!!! Im in a simular situation with a family member she purchased my home for me and agreed to sell it to me on LC and 5 months later she wanted to purchase a home for herself and couldnt because my home was already in her name, so she told the mortgage company that she had no idea of a mortgage being in her name even though she signed to home over to me by way of quitclaim deed and her signature is clearly on all the loan documents and i also got intouch with the closer from the title company and she agreed to testify on my behalf. I was served 2wks ago informing me that i was being sued only because they thought i had ownership in the property even though the deed is not recorded in county records. WHAT A MESS....what advise do u have for me? should i walk away from the property or try to fight for the property because of the money i already invested?
Ilyce says
You should immediately hire an excellent real estate attorney who can hopefully help you negotiate a way out of your situation. There was nothing wrong with your family member lending you her signature for the property, but there is a problem with lying on your mortgage application. You need legal help - make sure you find someone really good.
Michigan Mortgage says
thanks appreciate it and keep the good information coming....
Ness333 says
My friend is currently renting, needs to move in a couple of months due to rent increase and thinking of renting/buying a house with a broker that she thinks is legitimate. Scenario: He buys the $180k foreclosed house she is interested in, in her neighborhood (he has the foreclosure list, the $, and good credit), she rents from him with an option to buy. BUT...she needs to pay him $2600 first. She will pay him $1400 a month in rent (because that is what she can afford). I ask what he gets out of it? She said that he gets paid by the bank to get people in homes. Is this a Scam?
ST says
Ness333. It may be fraud. I would be careful before giving money to anybody under those circumstances. Is the broker with a legitimate real estate office. Will the real estate office hold the funds until she is in the home. Is the $2600 applied towards future rent or is it a fee to the broker. If it's a fee to the broker, your friend might want to find a home on her own.