Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
I will be making an offer in two days on a property. I ran the comps, drove the comps, inspected the house and have a good feel for it's value. She has two other properties she also wants to sell me that I'm hoping get so I'm giving her my best price.
Comps (with .5 mi, 15sq', same bd/ba etc. ) show a range of $195-230k.
A near identical property with slightly better features (larger yard, driveway and a little prettier) sold a week ago for full price, $235k with multiple backup offers according to the agent.
The property is 12 yrs old and feels like a worn rental. Renovations will include a few doors, flooring, int paint, stucco repair, ext fencing fix, and the like. I didn't find any major structural issues and I plan to have a home inspection sniff out component defects which will be deducted if found.
I am anticipating a generic 'lipstick' remodel to the tune of $10-12k max.
I plan to list flat-fee MLS for $400 with 3% to buyers agent $6900 .
I'll have to evict tenants.
I'm factoring a 3 month holding time (although I suspect it will be less from what I've been seeing w/ properties at this price point).
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Will M:
And if it's #2 and you're disclosing your intent to your lender, then your lender is committing mortgage fraud as well.
I see. And exactly who would the lender be defrauding - themselves? Interesting legal concept. Kinda like calling the cops for hitting myself and them charging me for assault.
Not sure if this is a joke or if you're not familiar with how mortgage loans work...
Most OO loans these days are underwritten and insured by HUD and the federal government. If a lender knowingly provides an OO-based federal loan to someone who doesn't plan to occupy the property, the lender is defrauding the federal government. In addition, most standardized federal loans are sold one or more times between banks, so knowingly providing loans that don't abide by the underwriting standards set forth for those loans and then reselling them would be committing fraud from the perspective of the purchasing entity who is expecting the loan to conform to certain standards.
The rest of the loans are underwritten by the lender's own standards. These are called portfolio loans and are not federally underwritten. If the lender doesn't care if you occupy the property, then -- by definition -- it's not an OO loan, as the lender makes the rules and if they don't care if you occupy, it's not OO.
So, we go back to my original points...either:
1. It's not really an OO loan; or
2. You're committing mortgage fraud.
So, which is it?
Perhaps if you tell us what kind of loan it is, we can help you determine if it's #1 or #2.
Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
13y
Your claim of fraud based on either one of two things:
1) A prior sale I described to Jon where I sold a property i lived in with an OO loan within 90 days.
-or-
2) A theoretical future transaction where I relate I plan to make the subject property my primary residence until its resold in a similar fashion as the sale described in #1.
Please clarify exactly when you suspect this fraud occurred?
#1 was perfectly legal.
#2 is describing plans for a future - yet to be transacted - purchase. I don't know what to say other than the obvious - fraud can only apply to something that has actually occurred as even a child knows. Ridiculous.
"So, we go back to my original points...either:
1. It's not really an OO loan; or
2. You're committing mortgage fraud.
So, which is it?
Perhaps if you tell us what kind of loan it is, we can help you determine if it's #1 or #2."
Your "original point" was that I publicly admitted to mortgage fraud. You mean you made an accusation but you don't already know? You threw that out there so you tell me the basis of your claim. Or is your quest for more details a tacit admission that you spoke hastily before having all the facts?
You've already derailed this topic by alleging I "publicly admitted to mortgage fraud" - thanks. Now it appears you require more details of a future theoretical transaction ostensibly to support your basis. Sorry, not going to give credence to you juvenile diversions.
Next time resist the impulse to speak without all the facts. And if you can't help derailing a post, just move on. I am sure there are other topics where you can make a meaningful contribution.
PS - I see you didn't provide any examples of a borrower going to jail for selling their residence in the same manner I did. Forget?
Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
13y
Originally posted by Will M:
I do not intend to move in.
That sounds like conspiracy to commit fraud.
Originally posted by Will M:
I see. And exactly who would the lender be defrauding - themselves? Interesting legal concept. Kinda like calling the cops for hitting myself and them charging me for assault.
This is just thinking out loud.
If I went to B of A and had a friend who was able to grant me loans, or influence the granting of loans, and he agreed to commit fraud with me (whether as a favor, carelessness, or for nefarious purpose); don't you think a lender could then sue, "themselves". Although, "themselves" is just a euphemism for, "the employee" who agreed to work with me in such a fashion.
Even if you can't get in trouble, perhaps the employee can? Which still is a situation you shouldn't associate with.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Will M:
Your "original point" was that I publicly admitted to mortgage fraud.
There are a lot of really smart people on this thread (even if you don't think I'm one of them) who agree with me...not one that agrees with you. Not saying that makes me correct, but it's something to think about.
I notice you once again (despite my asking twice) failed to indicate what kind of loan you had -- federally insured or portfolio. Is there a reason you don't want to divulge this information?
I suspect you know I'm right which is why you don't want to provide details...
By the way, here is the definition of Occupancy Fraud and why it's considered fraud (how it hurts lending institutions):
Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
13y
Hi Manuel,
This was the context:
Jon: Are you planning to actually move in? That always makes rehab a challenge.
Will M: I do not intend to move in.
To my knowledge most DOT's - even those with minimum occupancy time frame clauses- provide 60 days after the date of purchase for the Owner to move in. This is true, as far as I know, even with occupancy clauses that require the owner to be the resident for at least 12 months. The provision is likely to allow renovations such as those I will be making.
I understand how it could sound like fraud, but in reality I could buy this place, make it my primary residence and not actually have to occupy the premises for 2 months while it's being rehabbed.
Regarding your hypothetical, I would agree that is fraud and all parties involved would face the repercussions. I've disclosed everything to my lender in the past. And why wouldn't someone? What is the actual rate difference between an OO and a NOO loan anyway? .4%?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Will M:
I've disclosed everything to my lender in the past. And why wouldn't someone? What is the actual rate difference between an OO and a NOO loan anyway? .4%?
The rates are an indication of the likelihood for the borrower to default. The lender could make money on an OO loan at a particular rate but lose money on the same loan (statistically) if it were to a NOO, as the NOO is more likely to default.
It's now been three times and you haven't answered what type of loan it was. Any particular reason you don't want to divulge that info?
property manager · Las Vegas, NV · Member since 2012 · 502 posts · 171 votes
13y
Will M I'm need to apologize first, cause I have been humored at your expense with this thread. ;-) You have to know that a mortgage broker/Lender will tell you anything to get a check. Even if they put you in a situation that could cause you harm later on. I don't think these guys like J Scott and Will Barnard are busting you B@!!z just to be "snarky", but you have you look at things from the outside perspective. I just had the district manager of Flagst@r B@nk tell a client to go OO when they knew full well it was a NOO deal. Its all well and good unless heaven forbid it goes bad and then US Marshalls show up to discuss the matter based on your signature. Don't get offended, just be cautious. As to your original questions,seems like you have a handle on it.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
I am unclear on a few things and as such, want to get crystal before providing more responses. I have heard the disclosure going to the lender and others referencing the lending broker. Which is it? If it is the actual lender who writes the check, then the disclosure eliminates any fraud. If it is just the broker, then we have more to discuss.
The lender that provided your previous loan based on an OO, was it a portfolio lender or government backed type? That too makes a difference.
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Will Barnard:
If it is the actual lender who writes the check, then the disclosure eliminates any fraud. If it is just the broker, then we have more to discuss.
Not necessarily true. The lender could be a bank, but if it's a loan underwritten to HUD, FNMA or FMAC standards and then insured by one of them, the lender is then defrauding the government. If that's the case, the OP may not be committing fraud, but the lender is.
The only way it may not be fraud is if it's a portfolio loan (not insured by any external institution), in which case I would argue it's not really an OO loan if the lender says you don't have to be an OO (by definition). And if it's a portfolio loan and the lender indicates it's OO and then sells the loan to another investor, the other investor could claim fraud if they're not told the loan was actually made to a NOO.
I don't see anyway that it's not either fraud or a NOO loan.
Rehabber · Albuquerque, NM - New Mexico · Member since 2011 · 283 posts · 38 votes
13y
Originally posted by J Scott:
Not necessarily true. The lender could be a bank, but if it's a loan underwritten to HUD, FNMA or FMAC standards and then insured by one of them, the lender is then defrauding the government. If that's the case, the OP may not be committing fraud, but the lender is.
J Scott Could it also be fraud if the person making the loan on behalf of the bank is grossly disregarding company policy? I mean, when someone says "lender", they mean the loan officer or person who actually approves the loan right? Could the person who approves the loan get in trouble (and perhaps drag the person they gave the loan to, into it?)?
Investor · Sarasota, FL · Member since 2008 · 17k+ posts · 17k+ votes
13y
Originally posted by Manuel Acuna:
J Scott Could it also be fraud if the person making the loan on behalf of the bank is grossly disregarding company policy? I mean, when someone says "lender", they mean the loan officer or person who actually approves the loan right? Could the person who approves the loan get in trouble (and perhaps drag the person they gave the loan to, into it?)?
Absolutely. And this is probably (just a guess) the most common situation.
And my guess is that the investor would still be somewhat culpable, as anything signed in the contract/note would override anything told to you by the loan officer.
Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
13y
Take a breath J. You have yet to clarify what you are asking and what you are alleging.
Previously I asked you to clarify and I will now repeat this question. You have made comments spanning different transactions. You need to clarify this before I can provide you this - got it? Here it is again:
I will also add the question::
What actions in the transaction in question constituted fraud?
Please be clear and specific in your allegation or I will not participate in this game of yours.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
Every loan I've done recently has had a form where you have to check one of two boxes:
The borrower [ ] does [ ] does not intend to occupy the property
Or something similar.
Did your loan documents have such a form? Which did you check?
If you checked the box that you did not intend to occupy the place, then everything seems OK. If you said you intended to occupy the place, and then moved in, that's fine, too. But above you said:
If you check the box that you do intend to occupy the property, did you? By that I mean changed your mailing address, changed your drivers license and car insurance, and actually slept in the place night after night? I agree its fine not to move in during the rehab. I wasn't actually asking that. But what do you mean by "count the property as my primary residence until it is sold." That doesn't sound like moving in. If you've checked this box that says you're moving in, and then didn't, then I think you have a problem regardless of what was agreed to verbally between you and the guy across the desk at the lender.
Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
13y
Jon,
It appears you are talking about the prior sale I described where I sold a Primary residence within a few months of the purchase. I do not have the DOT in front of me, but yes I recall some indication of occupancy like you describe.
I indicated the borrower DOES intend to occupy the property. And I in fact did (which I mention earlier).
The scenario you mention where I would not move into a primary residence during the rehab refers to a theoretical future sale that would come from an accepted offer (the original topic of this thread). I just wanted to clarify that.
I prefer to hold off on further discussion regarding J's fraud allegation until he articulates his claim.
Namely:
Please clarify exactly when you suspect this fraud occurred?
What actions in the transaction in question constituted fraud?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Will, there appears to be plenty of miscommunication here. You kept referring to this previous closed transaction as "a primary residence". Just because you call it your primary residence does not make it so. Since you checked in your loan docs that you intend to occupy as primary, then never did but only named it your primary, again does not make it so and that is where fraud would come into play.
I only intend to get this clear so we all have a full understanding of what took place so others may learn from it rather than the banter back and forth without any true clarity.
Fix & Flip or Hold · San Luis Obispo, CA · Member since 2012 · 136 posts · 63 votes
13y
Will, I understand exactly what you are saying. But please recall where I 3x previously communicated the details of this transaction:
Despite this the accusation has persisted. It's quite clear that J made a hasty and FALSE accusation with scant little information. I find it rude and exceedingly unprofessional that someone in business would make such off the cuff presumptions of someone who entered this forum respectfully and thankful to contributors. That he is trying to persist, hoping to find a way he could be right rather than apologize and admit his error and move on is immature.
It will be up to J to articulate his claim:
Please clarify exactly when you suspect this fraud occurred?
What actions in the transaction in question constituted fraud?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
Will, I find J to be very professional and I have respect for him, I think this all comes from some miscommunications and misunderstandings.
If you actually lived in the home you did sell, then obviously there is no fraud.
In any future events as you have described, it appears that you would be checking on the loan that you intend to live, yet never do and unless it is a portfolio loan, then that would be fraud. If we can clear up what type of loan it would be, that would be helpful.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
13y
By the way, welcome to BP Nation and some of this back and forth may be frustrating, but I believe you will find it to be educational not just for us typing, but others reading.
Rehabber · Alexandria, VA · Member since 2011 · 446 posts · 171 votes
13y
Will,
In one of your firsts posts you stated that you plan to do owner occupied conventional financing:
Originally posted by Will M:
$2000 Conventional financing ( Owner occupied w/ at least 20% dwn)
Then you followed that up with:
Originally posted by Will M:
I do not intend to move in. Regarding a OO loan, I've done it once before and sold in just under 90 days. I've spoke with others who have as well. My impression is that the lender isn't as concerned about it as some may think. I 've used the same lender for 3 NOO loans and 2 OO , one of the with a short turn around. While I don't plan to do this every time i recently sold my primary residence so i plan to take advantage of that. If he balks i can go elsewhere. Honestly I'm not too worried about that.
Piecing those two posts together it is plain to see that J Scott as well as many others do have a valid point when they say that what you are proposing is in fact mortgage fraud.
Only AFTER the words mortgage fraud were thrown in did you backtrack and say that you did in fact live in your original OO loaned homes. And, again, it was only AFTER mortgage fraud was thrown in did you say that you plan to move in after rehab.
Even if you did live in your previous homes, you stated that you sold it "in just under 90 days" and that one of which was a "short turn around." That doesn't constitute owner occupy, even if you did move in. Last time I checked most OO loans require the buyer to actually live in the home for at least 12 months.
You have no basis to stand on in your bickering with J Scott because from the information you provided in your first few posts it was quite clear that you had committed mortgage fraud in the past as well as planned to do so again in the future. Again you stated in your own words "I do not intend to move in" and that you have "done it once before."
I have no basis for this but I would venture to guess that you're backtracking to cover your heels. Thats mortgage fraud, buddy, like it or not.
Either way, you still don't have any profit in this deal.
Rental Property Investor · Mercer Island, WA · Member since 2008 · 22k+ posts · 14k+ votes
13y
No, I am not talking about any prior sale. I am talking about the property you mention in your first post in this thread. In your second post in this thread, the 10th post overall, dated Dec 20, 08:10 PM, you say:
Right after that, I asked:
OK, I confused the issue with the comment about rehab. But my question stands. If you're getting OO financing, like you stated in your second post, you would be expected to move in. Perhaps after rehab. But at some point, you would be expected to actually move in.
Two posts later, at Dec 21, 07:53 AM you wrote:
OK, so perhaps here you meant that you don't intend to move in during the rehab, but that you do intend to move in later. I took your statement to mean that you have no intention of moving in at all. Apparently several other, including J Scott and Will Barnard read that the same way based on their posts.
I don't believe any of us are talking about any specific past transaction. Certainly not the sale of your primary residence that you mention in the paragraph I quoted. I, and I think J Scott and Will, are reading what you wrote as saying you are getting an OO loan, doing a rehab, never moving in, and then selling it. And that you've done this before. And many folks, me included, believe this is loan fraud. Specifically, the fraud is in claiming you planned to occupy the property when you had no such plans.
I think this is where things ran off the rails. I now believe that you are saying that you you get two OO loans from this lender. One of them was your primary residence, which you recently sold. I now think you probably did live in the other one, but that's just a guess on my part. Assuming that's true, no harm, no foul. No loan fraud in the past.
OTOH, if you are thinking of buying this new house, the one that started the thread, with OO financing, you better be prepared to move in. Sure, do the rehab. But move in after that. In the first post on the second page, you wrote:
I don't know how to take that second sentence. That further added to the confusion. If you meant you were moving in, why not say that? Why use this odd wording of "count the property as my primary residence". Sorry, but those sound like weasel words.
If you're moving in after the rehab, and actually living there until it sells, fine. No problem. No fraud. This is actually a great strategy if you live there two years because you can exclude up to $250K in gains from taxes. But if you're living there for a few months, I think the lender is going to be unhappy. Payments for loans, especially if there is a broker involved, are made with an expectation the loan will be in place for several years. If its only out six months, the total made on the loan may not cover all the costs.
But if you're saying you have no plans to move in, which your wording has led me to believe, then you are committing loan fraud. I think now that may well not actually be your intention.
Rental Property Investor · Englewood FL & Prior Lake, MN · Member since 2012 · 107 posts · 33 votes
13y
I agree with Mr. Scott, Bernard, Espinoza, and Holdman. You publically and flippantly admitted mortgage fraud and we generally don't appreciate it. When looking for my next business partner, I know where not to start. Good luck with that.
SFR Investor · Dallas, TX · Member since 2011 · 604 posts · 243 votes
13y
I'm not sure why your posting a question on the forum, you don't seem to be interested in any responses, on the deal being good or not, or on the mortage fraud you are committing.
Since you know it all, why should we even bother, because the people here are trying to keep you from committing a federal crime on a deal thats not even good,,,,but you seem to know better.
Call HUD and explain what you want to do,,,,see what they say