For those of us agents who do short sales we are constantly asked by the bank certain questions as we go through the process, “what is our relationship to the homeowner” is one, we are asked to complete and sign forms for certain banks where we confirm we are not related to the homeowner and that we will not be making a profit, that there will be no change in the owner for at least 30 days past the close of escrow date and such. All of this is to insure that there is no fraudulent activity going on. So from the FBI’s website:
Mortgage fraud perpetrators are resilient. They adapt their schemes to changes in economic conditions and in lending practices.
In a thriving economy, loan origination fraud schemes are most prevalent. In a down market—when lending standards tighten and defaults and foreclosures rise—schemes targeting distressed homeowners become more common. These schemes include foreclosure rescue, loan modification, short sale, and bankruptcy fraud.
Distressed homeowner schemes have displaced loan origination fraud as the most common type of mortgage fraud in many areas of the country. Two years ago, less than 4 percent of the FBI’s mortgage fraud cases involved distressed homeowner fraud. Today, more than 20 percent of all mortgage fraud cases involve distressed homeowner fraud.
Advance fee/loan modification: Individuals guarantee that they can help homeowners save their homes by negotiating more favorable loan repayment plans with their lenders…in exchange for an upfront free. In reality, these individuals perform little or no work, might never contact the lender, and may even redirect mortgage payments to themselves. Perpetrators are often attorneys or falsely represent themselves as attorneys.
Bankruptcy fraud: Bankruptcy fraud schemes generally involve an individual requesting an upfront fee to stop foreclosure proceedings or negotiate a refinancing with the homeowner’s lender. In these schemes, the individual pockets the fees and files a bankruptcy petition in the homeowner’s name, often without the knowledge of the homeowner. In many cases, the homeowners are convinced to deed partial interests in their properties to fictitious companies or persons, and then perpetrators file fraudulent bankruptcy petitions in the name of the fictitious companies or persons to delay the foreclosure proceedings.
Debt elimination fraud: The perpetrators of these schemes—who often tell their clients they can take advantage of “loopholes in the system”—generally involve the use of specially prepared documents that are presented to the borrower’s lender to question the authenticity of their financial obligations. The documents sometimes refer to a specific government agency to help support the claims. Those operating these schemes often charge homeowners substantial upfront fees based on the total amount of the debt to be forgiven. (We’ve seen these types of schemes most often perpetrated by anti-government individuals like sovereign citizen extremists.)
Forensic audit fraud: This type of fraud usually involves an individual or company charging an upfront fee for the services of an alleged forensic auditor, mortgage loan auditor, or mortgage prevention auditor backed by forensic attorneys. These “auditors” supposedly review mortgage loan documents to determine whether the homeowner’s lender complied with state and federal mortgage lending laws. The subjects fraudulently tell homeowners they can use the audit reports to avoid foreclosure, accelerate the loan modification process, reduce principal, or even cancel their loan.
Mass joinder lawsuits: Perpetrators collect fees from distressed homeowners, ostensibly to become part of a class action lawsuit that would force their mortgage company to reduce their loan payments. Of course, no such lawsuit exists.
Short sale fraud: A legitimate short sale is a type of pre-foreclosure sale where the lender agrees to sell the property to a third party for less than the mortgage owed as a means of reducing lender losses. One of the more common forms of a fraudulent short sale scheme occurs when perpetrators convince a bank to accept a low-ball offer—usually from a straw buyer—and then subsequently sell the property to a legitimate buyer at a higher price for significant profit.