Two warning signs of equity skimming are as follows: The prospective buyer agrees to buy the home right away and without giving the property a thorough look; and. The prospective buyer does not put any money down but rather, hands you a piece of paper that, in so many words, says, “I.O.U.”
B is correct because multiple mortgage applications by one borrower is a red flag for chunking because chunking involves a third party submitting loan applications on various properties to multiple financial institutions.
Equity Skimming is a Mortgage Fraud committed by skimming the equity from a property as part of subprime lending refinancing. This fraud occurs when a homeowner who is in default on their real estate taxes or mortgage is offered a loan to prevent immediate foreclosure.
The phrase most frequently heard in HUD enforcement proceedings is “equity skimming.” HUD program of- ficials explain that equity skimming is the catch-all violation resulting from the unauthorized use of proj- ect assets and funds.
The Florida Legislature has provided that equity skimming is a third degree felony. A person convicted of a third degree felony may be subject to imprisonment of up to five (5) years and a $5,000 fine.
An inflated loan appraisal determines an asking price that is much higher than the market value of the home. An over-inflated appraisal is a type of mortgage fraud that could cause a buyer to pay much more for a home than they should.
It is considered “silent” if that second mortgage or loan is used to secure down payment funds and then not disclosed to the original mortgage lender prior to closing. Failing to disclose a loan to a lender is very illegal and borrowers who fail to do so could be prosecuted.
A straw buyer, or straw purchaser, is a person who purchases on behalf of another person. ... However, the act of using a straw purchaser is considered illegal where the transaction involves fraud or purchasing goods for someone who is legally barred from making the purchase themselves.
Loan flipping is the practice of refinancing a loan frequently over a short time while charging the borrower fees for each transaction. ... Loan flipping involves refinancing a residential mortgage with high fees in order to strip equity from a home, with little or no benefit to the borrower.
A buy-and-bail is when the homeowner is current on the mortgage, but the value of the home has fallen below the amount owed (underwater), so they apply for a purchase-money mortgage on another home. After the new property has been secured, the buy and bail borrower will allow the first home to go into foreclosure.
In addition, we considered Red Flags from the following five categories (and the 26 numbered examples under them) from Supplement A to Appendix A of the FTC's Red Flags Rule, as they fit our situation: 1) alerts, notifications or warnings from a credit reporting agency; 2) suspicious documents; 3) suspicious personal ...
Reverse mortgage scams are engineered by unscrupulous professionals in a multitude of real estate, financial services, and related companies to steal the equity from the property of unsuspecting senior citizens or to use these seniors to unwittingly aid the fraudsters in stealing equity from a flipped property.
Regulation Z prohibits certain practices relating to payments made to compensate mortgage brokers and other loan originators. The goal of the amendments is to protect consumers in the mortgage market from unfair practices involving compensation paid to loan originators.
A balloon payment is a larger-than-usual one-time payment at the end of the loan term. If you have a mortgage with a balloon payment, your payments may be lower in the years before the balloon payment comes due, but you could owe a big amount at the end of the loan.
A fix and flip is a type of real estate business model where a real estate investor buys an investment property with the intent of selling it for a higher price than what was paid. The goal is for the sale (and subsequent profit) to happen as quickly as possible.
Shotgunning: Occurs when multiple loans for the same home are obtained simultaneously for a total amount that may be in excess of the actual value of the property.
How It Works: "Flopping" occurs when a short sale is approved based on a misrepresentation of the value of the property. In a typical flopping fraud, the fraudster is the buyer purchasing the property from the short sale seller. In some cases of flopping, the seller's real estate agent is the buyer.
A non-arm's length transaction occurs when the buyer and seller have a personal relationship. A deal between friends, family or co-workers is considered to be a non-arm's length transaction. With these home sales, self-interest may not be the motivation, for instance, when parents sell their home to an adult child.
A silent second mortgage is a second mortgage placed on an asset (such as a home) for down payment funds that are not disclosed to the original lender on the first mortgage. The second mortgage is called "silent" because the borrower does not disclose its existence to the original mortgage lender.
Down payment assistance can include loans, grants, tax credits1 and other programs designed to help eligible home buyers cover down payment or even closing costs. These programs are offered by federal, state, county or local government agencies, nonprofits or employers.
RESPA covers loans secured with a mortgage placed on one-to-four family residential properties. Originally enforced by the U.S. Department of Housing & Urban Development (HUD), RESPA enforcement responsibilities were assumed by the Consumer Financial Protection Bureau (CFPB) when it was created in 2011.
If A House Is Appraised Higher Than The Purchase Price
You're in a good situation if this happens. It simply means that you've agreed to pay the seller less than the home's market value. Your mortgage amount does not change because the selling price will not increase to meet the appraisal value.
Contact the appraiser. Give her a call to go over the appraisal and ask for the information she relied on to reach the proposed appraisal value. Find out whether the "comparable" sales are accurate, complete and timely. If not, ask that the appraiser to consult a better data set and adjust the value as she may see fit.
Regulation Z protects people when they use consumer credit.