Fraud Thursday continues as Bloomberg reports on the latest scam: Banks Face Short-Sale Fraud as Home ‘Flopping’ Schemes Spread:
“Two Connecticut real estate agents found a way to profit in the U.S. housing bust: Buy low, sell fast. Their tactic was also illegal.
Sergio Natera and Anna McElaney are scheduled to be sentenced in Hartford’s federal court in August after pleading guilty to fraud. Their crime involved persuading lenders to approve the sale of homes for less than the balance owed — known as a short sale — without disclosing that there were better offers. They then flipped the houses for a profit.
The Federal Bureau of Investigation, the California Department of Real Estate and mortgage finance company Freddie Mac have warned that such schemes may be spreading after a plunge in values left homeowners owing more than their properties are worth. The scams threaten to deepen losses for lenders that are increasingly agreeing to short sales as an alternative to more costly foreclosures”
I grew up the son of a real estate agent. We used to hear tales of nefarious, sleazy behavior of agents fighting for commissions from my mom. She always managed to find the nasty humor in agents’ bad behavior.
Ahhh, such sweet gentler times. From the RE’s participation in appraisal fraud, to their steering clients to NINJA mortgage brokers, their behavior was always dubious, but not criminal.
“A prevalent scam involves a practice called “flopping,” Barofsky said. In that scheme, investors or home buyers hire brokers to assess a home for less than its market value and convince banks to accept a sale at that level. The buyer conceals from the lender that he has lined up a higher offer and then quickly resells the property for a profit, as in the Connecticut case.
“Flopping” occurs in more than 1 percent of short sales and may cost lenders $50 million this year, according to estimates from CoreLogic Inc., a real estate data and research company in Santa Ana, California. About 12 percent of existing home sales, or almost 622,000 houses, were short sales in the 12 months through April, data from the National Association of Realtors show. “
And now, you can add “Or make a quick profit defrauding banks through bid rigging schemes!”
Banks Face Short-Sale Fraud as Home ‘Flopping’ Schemes Spread
Bloomberg June 10, 2010