Short Sale Fraud

What REALTORS® can do to stop fraud

More than 500 REALTORS® attended the Short Sale Fraud Special Industries Class presented by the Minnesota Association of REALTORS® on March 9.

This continuing education opportunity featured some sobering numbers of fraud in Minnesota, what investigators are doing to try and stop fraud and how REALTORS® can be involved in the fight against real estate fraud.

Attorney Brad Boyd outlined just what fraud is. It’s a “misrepresentation or omission, often for the purpose of obtaining a profit or material benefit.” Brad told the group that “we all pay the price for real estate fraud – imagine where the housing market and economy might be today, had real estate fraud transactions never occurred in significant numbers.” It is a sobering thought – where would we be if those fraudulent loans and transactions hadn’t happened?

MN Association of REALTORS Fraud Class

Minnesota is #3 in the number of mortgage fraud cases being prosecuted (Florida and California are numbers one and two, respectively). If you’re convicted of fraud, the punishment can include $10,000 per violation, suspension of a license or revocation of license. What can you do if you think a fraud is happening? Don’t keep quiet! Brad recommends asking questions, challenging assumptions, obtain legal counsel and report what’s going on. You can see a list of some of the schemes the FBI is tracking here.

Attendees also heard from Brandon Johnson, a Detective at the Insurance Fraud Division at the Minnesota Department of Commerce. He has been with the Department since 2009 and has been a police officer since 2005. Brandon was previously a mortgage underwriter for Wells Fargo. He had great insight into what REALTORS should look for if they’re worried about the chance of fraud:

  • Watch for people qualifying for loans well outside of their ability to pay
  • Brokers or agents exceeding far beyond industry norms
  • Rumors of shops that make miracles happen
  • Agents or brokers who consistently use the same appraiser or title company
  • Information that doesn’t pass the smell test
Jennifer Kahn, a Special Agent with the FBI talked about what her office is seeing in terms of real estate fraud and the changing focus for the Bureau in terms of the schemes agents are investigating. The FBI’s traditional focus has been loan origination schemes, but it’s now seeing an increase in foreclosure rescue schemes where homeowners are convinced they can save their homes from foreclosure through deed transfers and the payment of up-front fees. The “rescue” often involves a manipulated deed process that results in creating forged deeds.

Special Agent Kahn also discussed a government and private sector alliance called “InfraGard.” Its goal is to support information sharing between the FBI and private industries. It’s free to join but you do need to be a U.S. citizen, pass a limited FBI background check and sign privacy and non-disclosure agreements.

If you do suspect a case of real estate fraud, here are several places to contact:

If you’re interested in mortgage fraud – this blog is a good one to bookmark.
Did you attend the Short Sale Fraud class? We’d love to hear your feedback – just leave a comment!
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