I think a lot of people don't realize that loan fraud is a federal offense. Don't write anything on your application that isn't true. Don't exaggerate your income, don't lie about occupancy, don't lie about anything when applying for a loan. The chances of you getting caught are very small but the penalty is prison time. So not worth it.

http://www.hudoig.gov/sites/default/files/documents/2014-CF-1801.pdf @John Rooster First case I saw.

You don't know the buyer is even getting a loan. The buyer may be paying cash. You are conflating The Bank selling the property with a hypothetical insured lender which doesn't exist. Point missed

John, read what it says, loan OR transaction, deceiving OR providing false information, breaking it down further; false information in a transaction with the insured lender as the seller, = fraud. If you conduct any business of any kind with a bank don't be pulling anything based on or using any misleading information, verbal, written or by implication. The size or scope of the sneaky transaction is irrelevant, anything that is done that does or even could cause a loss is punishable as a felony. If everyone cheated a bank out of $100 it threatens the banking system and federal insurance claims. If you are dealing with a bank you better be shooting straight, they clearly have the upper hand from a legal aspect. The same is true with HUD as well as Mark pointed out. There are many issues where you may think you have to be proven guilty of a crime, this is one area where you can simply be accused of a crime, the act or attempt itself is a crime, and you'll be defending against the accusation that you attempted to do something, you'll likely lose. I have no idea how many people thought they could pull one over on a bank and ended up in prison, but I know there are such people in prison. They all thought they were smarter than they were. :)

That isn't a court case. Try better

It is called Mortgage Fraud and there is no way around it. On Fed properties Wait till Owner Investor period ends, see if property is still available, make credible offer, probably all cash.

Doesn't matter what the law is. Lying to the an insured lender is the same as lying to the feds.....which makes it a federal crime. How hard is that to understand? Intent to deceive and defraud are not that hard to prove, especially when the intent was to deceive or defraud.

The person listed in that case ended up paying a penalty to get off. It seems that some people will still try to violate the law if they deem the gain is more than the penalty if caught. This reminds me of the oil spills and illegal dumping in the ocean when I was a kid. These oil companies might save 100 million dumping but only pay 10 million in fines at the time. So by their standards they were profiting 90 million. It wasn't until the fines were raised so high that most didn't even think about doing it as perceived gain was outweighed by the risk. I believe most honest people would not want to violate laws for financial gain.

How does one circumvent an owner occupied clause on REO's

Buying & Selling Real Estate

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How does one circumvent an owner occupied clause on REO's

Spencer Simon

Real Estate Investor · Rougemont, NC · Member since 2014 · 12 posts · 0 votes

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Account Closed

Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes

12y

Sometimes I wonder if posts like these are plants by DAs or AGs. But to give them credit, I think their posts would be more creative and comprehensive.

Don't circumvent an owner occupant clause. Done.

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Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Sometimes I wonder if posts like these are plants by DAs or AGs. But to give them credit, I think their posts would be more creative and comprehensive.

Don't circumvent an owner occupant clause. Done.
5 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
12y
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.
1 Reply
Rolanda Eldridge
Investor/Realtor · Hoover, AL · Member since 2010 · 1k+ posts · 459 votes
12y
lol....PRISON.....no need to break laws...
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Buy and move in! :)
0 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
I think a lot of people don't realize that loan fraud is a federal offense. Don't write anything on your application that isn't true. Don't exaggerate your income, don't lie about occupancy, don't lie about anything when applying for a loan. The chances of you getting caught are very small but the penalty is prison time. So not worth it.
4 Reply
John Adamkewitz
Real Estate Investor · WI · Member since 2013 · 125 posts · 33 votes
12y
I'm sure it could be done, but You'll need to be prepared to cut a check to the mortgage holder for the entire mortgage balance within 30 days after You receive that one letter they send out, calling the loan.

Then the next move would be an emergency 30 day close re-fi, and then having to explain to the new bank, why You need to replace the existing mortgage.

It may be time to rethink this plan.

John
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Spencer Simon
OP
Real Estate Investor · Rougemont, NC · Member since 2014 · 12 posts · 0 votes
12y
Thank you all, not trying to commit a crime or do some time.
0 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
Same advise...you don't. But, OP seems to be talking about buying a REO during the OO period, with no intention of occupying.
0 Reply
John Rooster
Denver, CO · Member since 2013 · 409 posts · 105 votes
12y
Originally posted by @Brian Gibbons:
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.

I only buy at foreclosure sales, therefore I need not concern myself with owner occupied clauses related to REO properties. But I take issue with your assertion that it is the law. It is not the law, it is just clause in a contract. A clause which I doubt has ever been enforced through the courts, or ever could be enforced through the courts.
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
Originally posted by @John Rooster:

Originally posted by @Brian Gibbons:
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.

I only buy at foreclosure sales, therefore I need not concern myself with owner occupied clauses related to REO properties. But I take issue with your assertion that it is the law. It is not the law, it is just clause in a contract. A clause which I doubt has ever been enforced through the courts, or ever could be enforced through the courts.

You're right, but that's not the issue, deceiving or providing false information to any insured lender in connection with any loan or business transaction is a felony. :)
0 Reply
Wayne Brooks
Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
12y
http://www.hudoig.gov/sites/default/files/documents/2014-CF-1801.pdf

@John Rooster

First case I saw.
2 Reply
Joel OwensBusiness Member
Moderator
Real Estate Broker · Canton, GA · Member since 2010 · 15k+ posts · 11k+ votes
12y
The person listed in that case ended up paying a penalty to get off.

It seems that some people will still try to violate the law if they deem the gain is more than the penalty if caught. This reminds me of the oil spills and illegal dumping in the ocean when I was a kid. These oil companies might save 100 million dumping but only pay 10 million in fines at the time. So by their standards they were profiting 90 million.

It wasn't until the fines were raised so high that most didn't even think about doing it as perceived gain was outweighed by the risk.

I believe most honest people would not want to violate laws for financial gain.
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1 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
Originally posted by @John Rooster:

Originally posted by @Brian Gibbons:
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.

I only buy at foreclosure sales, therefore I need not concern myself with owner occupied clauses related to REO properties. But I take issue with your assertion that it is the law. It is not the law, it is just clause in a contract. A clause which I doubt has ever been enforced through the courts, or ever could be enforced through the courts.

Doesn't matter what the law is. Lying to the an insured lender is the same as lying to the feds.....which makes it a federal crime. How hard is that to understand? Intent to deceive and defraud are not that hard to prove, especially when the intent was to deceive or defraud.
1 Reply
Account Closed
Investor · Central Valley, CA · Member since 2012 · 6k+ posts · 3k+ votes
12y
I posted a link at least year ago to a New York Times article about a celebrity athlete that was prosecuted and is serving two years. Interesting, an IRS agent investigated him because the athlete was traveling and training full time but wasn't reporting that much income. He assumed the athlete was underreporting his income and wanted to know where the money came from.

Turned out the athlete had not underreported his income. But the IRS agent found two loans on two properties made during the Bubble that had gone to foreclosure. One of the loans was made with stated income and the broker put in an exaggerated number. The IRS agent turned it over the lenders and the feds to prosecute, which they did.

How many people do you know who exaggerated their income on a stated income app.?
0 Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@John Rooster

John I think the assumption was that this investor is trying to buy a property that has already gone through the foreclosure process and is being sold with the owner occ criteria which is something like for the first 14 days or 30 days only those that intend to occupy as primary residence may make offers on the property.. Investors need to wait until this time expires.. then they can offer. I think what this investor wanted to know is how to circumvent this requirement so they can swoop in on good deals.

One thought would be to do what we did in the 80's in CA.. Where we did all sorts of equity shares with home owners.. WE would put up the down payment and the homeowner would get the loan move into the home and live there for 3 to 5 years and either pay off the investor, or the house was sold and profits split.

Now I don't know if that will fly with current underwriting guidelines. But maybe.. Does not solve the problem of this guy who wants first crack at the deals and does not want to wait our the Owner occ offer time lines.

I think I got this one right. And of course there is no rules at Auction about who can buy its the guy with the CASH period. But that's a whole nother kettle of fish
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Kurt Kreager
SFR Investor · Bellevue, WA · Member since 2014 · 4 posts · 3 votes
12y
It is called Mortgage Fraud and there is no way around it.

On Fed properties Wait till Owner Investor period ends, see if property is still available, make credible offer, probably all cash.
1 Reply
Brian Gibbons
Investor · Sherman Oaks, CA · Member since 2008 · 6k+ posts · 3k+ votes
12y
FBI loooooves Mortgage Fraud. US Postal Service too.
0 Reply
Spencer Simon
OP
Real Estate Investor · Rougemont, NC · Member since 2014 · 12 posts · 0 votes
12y
It's a property that I can pay cash for and needs a few thousand dollars of TLC. I'll just wait till the 14 day period and make an offer. I'm glad I asked the question and have been even more enlightened by the various responses. My intentions were not to break a law or deceive but to see if there is another way of meeting my objective in acquiring the property.
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Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
12y
@Spencer Simon

All is well then good luck
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John Rooster
Denver, CO · Member since 2013 · 409 posts · 105 votes
12y
Originally posted by @Account Closed:

Originally posted by @John Rooster:

Originally posted by @Brian Gibbons:
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.

I only buy at foreclosure sales, therefore I need not concern myself with owner occupied clauses related to REO properties. But I take issue with your assertion that it is the law. It is not the law, it is just clause in a contract. A clause which I doubt has ever been enforced through the courts, or ever could be enforced through the courts.

Doesn't matter what the law is. Lying to the an insured lender is the same as lying to the feds.....which makes it a federal crime. How hard is that to understand? Intent to deceive and defraud are not that hard to prove, especially when the intent was to deceive or defraud.

No it isn't. That is just silly. We are not talking about getting a loan. We are talking about buying an REO. If he is paying cash he is not lying to a lender. He is only lying to the Seller. You might think it ok to have clauses in contracts which discriminate against certain classes of people, I don't. I see it as a civil rights issue.
0 Reply
John Rooster
Denver, CO · Member since 2013 · 409 posts · 105 votes
12y
Originally posted by @Wayne Brooks:
http://www.hudoig.gov/sites/default/files/documents/2014-CF-1801.pdf

@John Rooster

First case I saw.

That isn't a court case. Try better
1 Reply
John Rooster
Denver, CO · Member since 2013 · 409 posts · 105 votes
12y
Originally posted by @Bill Gulley:

Originally posted by @John Rooster:

Originally posted by @Brian Gibbons:
As K. Marie Poe said, obey the law or don't up to u. At ur own peril.

I only buy at foreclosure sales, therefore I need not concern myself with owner occupied clauses related to REO properties. But I take issue with your assertion that it is the law. It is not the law, it is just clause in a contract. A clause which I doubt has ever been enforced through the courts, or ever could be enforced through the courts.

You're right, but that's not the issue, deceiving or providing false information to any insured lender in connection with any loan or business transaction is a felony. :)

You don't know the buyer is even getting a loan. The buyer may be paying cash. You are conflating The Bank selling the property with a hypothetical insured lender which doesn't exist. Point missed
1 Reply
John Rooster
Denver, CO · Member since 2013 · 409 posts · 105 votes
12y
Originally posted by @Kurt Kreager:
It is called Mortgage Fraud and there is no way around it.

bangs head on desk
0 Reply
Mark Ferguson
Flipper/Rehabber · Greeley, CO · Member since 2013 · 2k+ posts · 1k+ votes
12y
@John Rooster umm, yes it is a crime to buy a HUD home as an investor pretending to be an owner occupant. It is a felony punishable up to two years in federal prison and $250,000 in fines. I have talked to my HUD asset mangers and they confirmed they are prosecuting an investor now. Although HUD is very tight lipped on these issues.

At a minimum HUD will cancel your contract, take your earnest money and take away the agents NAID number that represented the buyer if HUD thinks they knew.
0 Reply
Bill Gulley
Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
12y
John, read what it says, loan OR transaction, deceiving OR providing false information, breaking it down further;

false information in a transaction with the insured lender as the seller, = fraud.

If you conduct any business of any kind with a bank don't be pulling anything based on or using any misleading information, verbal, written or by implication.

The size or scope of the sneaky transaction is irrelevant, anything that is done that does or even could cause a loss is punishable as a felony. If everyone cheated a bank out of $100 it threatens the banking system and federal insurance claims.

If you are dealing with a bank you better be shooting straight, they clearly have the upper hand from a legal aspect. The same is true with HUD as well as Mark pointed out. There are many issues where you may think you have to be proven guilty of a crime, this is one area where you can simply be accused of a crime, the act or attempt itself is a crime, and you'll be defending against the accusation that you attempted to do something, you'll likely lose.

I have no idea how many people thought they could pull one over on a bank and ended up in prison, but I know there are such people in prison. They all thought they were smarter than they were. :)
1 Reply

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