I see this question asked over and over on housing blogs but most of the answers are so complex and technical that you would need to be a mortgage broker or an accountant to understand the explanation.
Well today as I was reading Miami condo investments a reader named Generalagic left one of the best, easy to understand, examples of how mortgage fraud which he witnessed as a realtor in Miami actually occured.
Just wanted to share this great post with you all;
Generalagic // Mar 21, 2008 at 8:01 pm
As a realtor in South Beach, I know first hand of all the fraud that went on. I unfortunately had to witness it because no one listened to me in the buildings where I work and because both local and Federal authorities turned a blind eye. I saw so many transactions go on where properties were listed on MLS let’s say at $550K. The fraud buyer would pay full price and would tell the seller he is going to get it appraised at let’s say $800K. Seller agrees because all they want to do is sell the apartment and get out. Now the buyer get 100% financing at $800K, gives seller $550K and the fraud buyer just walked away with $250K. In addition, the realtor representing each side made out, even though they knew what was going on.
Now the fraud buyer sticks a tenant in the unit at a discount price. So now the fraud buyer stops paying his mortgage and maintenance on the building while collecting rent and pocketing the profit on the spread. This went on over and over and over in so many building everywhere.
What frustrates me more than anything is that Federal authorities and local either said it was not there jurisdiction and never did anything. I have a lot of evidence yet no one has done anything.