Phoenix Mortgage Fraud

For months I have been writing about mortgage fraud and the ill effects on the housing market. While I've presented few Phoenix examples, the notorious Casey Serin (iamfacingforeclosure.com) remains the poster child for a growing national problem.

The Arizona Republic is just now deciding this is an issue which should be addressed. The focus of the article is the illegal 'cash-back' at close of escrow practice.  This is not about closing cost assistance and the like. Cash-back at close is basically where a seller has a property on the market for say $200,000 and a buyer comes along and offers $220,000 with the seller writing a check after close to the buyer for the $20,000 over the list price. An appraisal is needed for the $220,000 in order for this to work.  This is illegal.

Mortgage fraud takes many forms. Cash-back is just one of the most popular. It has been going on for a long time. Nothing new here. What is new is the increase in occurrences. Based on my educated opinion, sellers are doing just about anything they can to get a property sold. If you are selling a re-sale home and competing with a major builder across the street, you have very little leverage when it comes to incentives.

OK, back to cash-back. Illegal. Here is the scary part;

"At a recent Valley real estate meeting with 1,000 agents, mortgage brokers and escrow people, a speaker asked people in the audience if they knew of any cash-back deals in the Valley. All but a handful raised their hands. Many seemed surprised when told such deals are illegal. "......

Why were so many 'real estate professionals' surprised cash-back is illegal? Could it be that during the whopping 90 hours of education required to obtain a real estate license in Arizona it is never discussed? Probably. Could it be during the grueling 24 hours of continuing education required every 2 years this little tid-bit falls through the cracks.

We real estate agents can sit back and blame the lenders and appraisers for all of this rampant fraud or we can start being proactive and take some control of our industry standards. Sadly I don't see this happening any  time soon.

Comments

[Alicia]

I have a real-estate question:

My husband and I are purchasing a home from my husband's uncle. We are first time homebuyers and his uncle wants to help us out. His house was appraised at $120,000 (we live in ohio where houses are cheaper) and his uncle has agreed to give us $2,000 back to help us pay for our appartment lease. In return my husband is helping his uncle with dry-wall and painting in his new home.

Is this illegal? I realize that we are getting cash-back upon closing, but the appraiser is not lying about the value of the home- our uncle is just helping us out.

Thanks!