Was this mortgage fraud?

129 Replies

A person owns a home in Washington, DC and has a mortgage on it. They relocate to Massachusetts. One month later, they refinance the DC home and get a new mortgage, claiming the DC property is still their primary residence, even though they're now residing in Massachusetts. That seems like it was fraud. But there's more.

A year later, while still living in Massachusetts, they buy a home in Massachusetts. They obtain a mortgage to fund their purchase for this newly acquired home. For this new mortgage, they claim this will be their primary residence. They then proceed to truly live in this new Massachusetts home as their primary residence.

The question is, has this person comitted any wrongdoing with respect to the mortgage they acquired for the Massachusetts home? Did they defraud the Massachusetts lender, or have they only defrauded the DC lender?

normally lenders will catch these red flags.. but if the intention is to get the loan in DC in owner occ knowing they are going to turn it right into a rental.. then yes that is a violation.

Jay thanks for your reply, but I'm actually trying to figure out if they might be in the wrong in any way with the mortgage they obtained from the Massachusetts bank.  What are your thoughts on that, if any?  Again, thank you! :)

No, as far as the WDC loan, they clearly relocated to Massachusetts the first week of August, 2016, then refinanced the DC property in the first week of September, 2016.  They clearly indicated their relocation to MA and that date on their own social media accounts.

Thank you for your question, Russell.  I was in the middle of legitimately acquiring the mortgage note for the Massachusetts property, already in foreclosure, when a combination of this person, the sellers, the seller's mortagee, the seller's real estate agent, and the buyer's real estate agent, convinced the note holder to back out of his sale to me.  They then orchestrated a sale of the property to the buyer I'm investigating.  The mortgage the buyer received for the home was arguably fraudulent.  The home had extensive physical deficiencies like no running water, and padlocked rooms with floor joists structurally unable to be walked on.  Yet the realtor conducted a regular sale of the property, and the buyer received a conforming mortgage.  So, along with trying to determine if the buyer himself committed wrongdoing in appying for the mortgage he received, it already appears obvious that somehow the banks appraisal process must have been monkeyed with in order to result in the bank giving the buyer an ordinary mortgage for the purchase.  I'm determined to uncover every bit of wrongdoing that took place and bring all available evidence for it to all possibly relevant authorities.

@Russell Brazil   sounds like a women scorned LOL.... 

John to help you with this quest.. who was the lender.. there are plenty of lenders that would do that deal with a 203k  type loan or if its a local community bank they can lend on anything they like you should see what i buy and my local bank lends on.. extreme hoarder houses.

and did you stop to think that this might have benefited the seller or owner of the note as compared to you coming in and buying the note.. maybe they did for the simplest reason of all. to minimize their loss or maximize their return.

also when buying a note its not like going into contract to buy the asset. I know our note purchase agreements are simple one page affairs and there is nothing keeping the seller from changing their mind .. we just move on it happens.. 

but sounds like your pretty torqued on this one... mortgage fraud and appraisal fraud is handled by FBI FYI.  If this is one off doubt they will do much.. to do anything with FBI you call them on the phone leave the details and they will call you if interested if they are not you simply never hear from them.. its not like TV.

as a fairly large HML in my day I had a 15 million dollar forgery case that we were in teh middle of ( borrower forged docs.) that got turned over to the DA and that guy got 9 years in San Quentin ... which that probably is what your looking for LOL

In todays market, its nearly impossible to get an appraiser in on the fraud because they are assigned randomly. 

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

So Jay, as far as you'd figure, it wouldn't be considered any kind of a problem by the Massachusetts bank that the applicant for the mortgage applied for a primary residence loan when he already had another primary residence mortgage out from a bank in DC, for a property he owns there?

@John Jackson Nothing posted on this site can be used in your case... unless in the unlikely event there is some statement made by your homeowner, and even then there are limitations.

Hire an attorney. Your answer won't be found here.

Originally posted by @John Jackson :

So Jay, as far as you'd figure, it wouldn't be considered any kind of a problem by the Massachusetts bank that the applicant for the mortgage applied for a primary residence loan when he already had another primary residence mortgage out from a bank in DC, for a property he owns there?

 No that would not be a problem. People do not change their old mortgages when they acquire new ones. The bank would have been well aware of the existing mortgage.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

Thank you Russell, I'm aware of that.  Do you have any ideas then on how the bank would have decided to make the loan they did, if the appraisal was truthful?  Could they give a conforming mortgage like that to a property that was arguably not even legal to occupy?

Russell, so, the Massachusetts bank wouldn't be concerned that the loan applicant was asking for a primary residence mortgage, when they already have a primary residence mortgage with another institution?  They wouldn't be concerned about lending money to someone who was openly violating the terms of his mortgage with another bank?  Are we just saying that the rules for mortgages don't reflect the practical ways in which they're used, so everyone just ignores them when they get in the way, and no one cares?  Not even enforcement or regulatory agencies?

Originally posted by @John Jackson :

Thank you Russell, I'm aware of that.  Do you have any ideas then on how the bank would have decided to make the loan they did, if the appraisal was truthful?  Could they give a conforming mortgage like that to a property that was arguably not even legal to occupy?

 If you are trying to acquire the note on the property, then I assume it is not in fact a conforming loan. If it were, it would have been sold to Fannie/Freddie most likely. It could also be a rehab loan. Also you know what the property looks like now....you dont know what the condition was in the past.

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635

Tom, I didn't think I was indicating I was looking to get anything here to use in my case.  Not directly, I guess.  I'm just trying to learn as much of the details about what I'm dealing with as I can.  That should be fine all day long, yes?

@Russell Brazil No, the note I was in the middle of buying was discharged by the note holder before the sale of the property took place.  The loan the person who bought the property received, from the local bank, is just an ordinary conforming loan for a primary residence.  And I know what the condition of this property has been for at last the past decade.  Before the last owners purchased it, it had been listed for sale in 'as-is' condition.  Those last owners then did absolutely nothing to correct the deficiencies of the home in the entire 5 years THEY owned and occupied it.  So it had only deteriorated further, by the time I looked at it in January, 2017.  But still, the local bank gave the recent buyer a conforming mortgage.  That just seems like no issue whatsoever?

Originally posted by @John Jackson :

Tom, I didn't think I was indicating I was looking to get anything here to use in my case.  Not directly, I guess.  I'm just trying to learn as much of the details about what I'm dealing with as I can.  That should be fine all day long, yes?

I was actually thinking jilted lover, revenge thing. Hmmm.

@Tom Gimer You're saying that banks just don't care what other borrowing situations loan applicants are already in when they apply for a loan?  Or are you saying that they can choose to ignore those things if they want to, regardless?

@Tom Gimer No, this has nothing whatsoever to do with anyone's marital or relationship issues.  None that I'm aware of, at least.  This is about a property I came upon and concluded I wanted to invest my family's future in, for a variety of reasons.  The property was at the center of a contentious mess between its owners and their lender, a man they'd bought the property from who'd privately given them their mortgage himself.  They 'repaid' him by not repaying him.  They made only a handful of mortgage payments during the first three years, then they just stopped paying at all for the last two.  Likewise on their property taxes for their last three years.  Meanwhile, one of the two owners, a couple, was earning a public salary of more than $90K, and she owns a vacation property in Maine.  And she'd lost a previous property in the area to foreclosure a year before.  This same woman was now trying to sell this property while she was $280K in arrears to the note holder, $13K in taxes to the town, and she was insisting she was going to walk away with $40K from any sale of the property.  As I became aware of all these details, it occurred to me it didn't seem prudent at all to even consider trying to deal with this person as the seller.  That's when it dawned on me it might make more sense to look at the situation as a potential for investment and attempt to buy the mortgage note at a discount as a bad debt.  For whatever reason, he had been unable or unwilling to take action against the defaulting owners until recently, when he'd finally started to move forward with foreclosure.  My thought was that I could offer him a deal that would take the whole thing off his hands in exchange for a discount on his note, and then I'd own the risk and reward calculus of either getting the owners to cure their default on the note, or complete the foreclosure that was already in progress and repossess the assett.  The note holder's attorney had already collected a $2500 deposit from me weeks before the owner's realtor suddenly had a panic attack and said he had a sale of the house imminent.  That's when the note holder told his lawyer to give me my $2500 back and withdraw him from completing my purchase of the note from him.  Then it was another two months before the realtor managed to complete a sale of the property.

Hi @John Jackson ,

Re: the DC lender. If this guy goes to prison or loses a major law suit, he will likely be unable to make payments. Do not expect the entity servicing the loan to cooperate, at all. If they're still getting their payments on time from a borrower that had another property with a troubled mortgage, they are primarily going to be in "cover-your-butt" mode and trying not to upset the water with this financially fragile borrower. 

Re: the Mass lender. Getting a new owner occupant loan every 12 months, and living there for 12 months just like you promised at the closing table, is an above board strategy that people do. I'm probably not the first person to call it the "Nomad Strategy." If they moved in and lived there like they said they would, the Mass lender has no cause for complaint on the occupancy front. You can have unlimited primary residence mortgages, not the Fannie cap of 10 that folks on BP always talk about.

Re: the current owner's lender. Public records say nothing about what type of mortgage it was. Reno loans will go for beat up properties. Portfolio loans (these days) typically have nothing in public records indicating they are such -- Fannie Mae does ARMs too, so even the ARM rider wouldn't tell you anything. Most institutional portfolio lenders use Fannie/Freddie uniform paperwork / deeds of trust / etc, so the stuff you see at the county recorders office can say "Fannie Mae / Freddie Mac" all over it in spite of it being anything but a Fannie/Freddie loan.

I've never personally been involved in mortgage-related litigation (knock on wood), the above are my best guesses based on zero formal training or education in law.

Chris Mason, Lender in CA (#1220177) and California (#1220177)
415-846-9211

@Chris Mason Thank you very much, that is all very helpful information for me.  I really apprciate it :)

At the end of the day as long as mortgages are all being paid you would only frustrate yourself. For a bank to foreclose on something like this would be nearly impossible.

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