The Smooth Loan Process #2010-14

Big, Big Fraud From A Big, Big Bank

From the files of "I can't make this stuff up". A few months ago, we had a client that was purchasing a new build from one of the big builders that you have heard of. The buyer's best loan option was FHA. The FHA appraisal was done on the property and it came in $3000 less than the purchase price. When the buyers requested that the sales price be reduced to the appraised value, the builder informed them that the reason the appraisal came in low was because they used the wrong lender.

What?!?! It seems that the builder's opinion was that we intentionally influenced to the appraiser to bring the value in low. As wonderful as I think I am, I do not have the ability to change sales data in the area to influence the comps. That would be illegal. And for what? An extra $30 on my commission? I don't think so. I'll switch to domestic beer to save the money instead.

Then the buyers were told that if they switch their loan to the Builder's preferred lender which is a big, big bank that you have heard of, then they could "make sure" the appraisal comes in at the sales price. Seriously! So the buyers have just been told that Builder will do the very thing that they accused us of doing, but they'll do it better.

Here's the good part. FHA and HUD have systems in place to prevent this kind of thing from happening. Once an FHA appraisal is done, it stays with the property for 120 days. This is tracked with case numbers that are specific to the property. The borrower has the right to change lenders but the old lender has to transfer the case number to the new lender in order for the transaction to be completed.

We were never asked to transfer the case number, but the transaction has closed now with the big, big bank that you have heard of. How did they do this?

This big, big bank that you have heard of issued a new case number so that HUD would not be aware of the existing FHA appraisal. When they issued the case number they used a DIFFERENT property. Processed the appraisal and loan for the WRONG property. Then at closing, switched the property address on the closing documents so that it was correct for the buyers.

All of this information is available through public records and FHA Connection.

Wow! All of this over $3000. I don't think that the buyers knowingly participated in this, but they are involved now. Unfortunately, they did not have a Realtor representing them to point out that it doesn't make sense to use a lender that will "make sure" the appraisal comes in where it needs to.

The ironic thing to me is that this all happened at the same time that I was taking my licensing class in ethics. The same class that the big, big bank Loan Officers do not have to take because our government feels that they are big enough to monitor themselves.

The Smooth Loan Process lesson for today: Fraud is the worst of all the F words.

Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com