Pensacola Real Estate News: Mortgage Fraud on the Rise

In recent days, reports have been coming out that indicate the FBI has increased their real estate mortgage fraud caseload. That is not a big surprise, as a down real estate market provides an ideal climate for mortgage fraud perpetrators.  

Examples of real estate mortgage fraud include builder bailouts, seller assistance, foreclosure rescue and identity theft in exploiting home equity lines of credit. An example of a builder bailout scheme would be a builder providing undisclosed incentives to buyers, such as returning the down payment.

Remember, to stay out of trouble, make sure everything is openly disclosed to all parties, including the lender. As a real estate buyer, don’t let a seller try to provide you any incentives to buy that are not fully disclosed in writing.

The FBI had more than 1,200 mortgage fraud investigations open at the end of fiscal year 2007. This is a 47 percent increase from the previous year but still is estimated to be a small fraction of suspected cases. The number of suspicious activity reports (SARs) filed by banks detailing suspected mortgage fraud grew 31 percent during this same period, to 46,717. Although federally chartered banks are required to file SARs with the Treasury Department’s Financial Crimes Enforcement Network (FinCEN), many other mortgage lenders are exempt, suggesting that the FBI is investigating only a small fraction of mortgage fraud cases.

The FBI said the top 10 worst states for mortgage fraud were Florida, Georgia, Michigan, California, Illinois, Ohio, Texas, New York, Colorado and Minnesota.

A Pensacola real estate attorney spoke recently at a Pensacola Real Estate Navigators meeting. She told the audience about a local case of mortgage fraud that she handled. A man had bought a house and lived in it for only a few years. He then forged a Satisfaction of Mortgage and recorded it in the public records. Thus it appeared that he owned the home free and clear. He then applied for a home equity loan. In doing the title work, the attorney became suspicious, as it is rare that someone pays off a home in a few years. She checked with the bank and found that they still held the mortgage and it had not been paid off.

The attorney went ahead with the closing on the home equity loan. The man came into her office and signed the necessary paperwork. On his way out, the police were waiting for him. He was arrested and taken away.

It is not worth it. Disclose everything to your lender and to your buyers if you are the seller. In the long run, this ensures that everything is legal and no one ends up ruining their life over simple and plain greed.

Choosing a Home Builder

If you're in the market for a new home, you should shop for your builder as carefully as you shop for your home. Whether you are buying a condo, a townhouse, a house in a subdivision, or a custom built house, you want to know that you are buying a good quality home from a reputable builder. Here are a couple of tips to help you choose a builder.

Make A List of Possible Builders
Once you have thought about the type of house you want, you will need to find a builder.

• Contact you’re the Home Builders Association of West Florida *850) 476-0318 or visit www.westfloridabuilders.com to obtain a list of builders who construct homes in your area.
• Look in the real estate section of you local newspaper for builders and projects. Looking through the ads and reading the articles can help you to learn which builders are active in your area, the types of homes they are building, and the prices you can expect to pay. Make a list of builders who build the type of home you're looking for in your price range.
• Local real estate agents may also be able to help you in your search. Ask friends and relatives for recommendations. Ask about builders they have dealt with directly, or ask them for names of acquaintances who have recently had a good experience with a builder.

Do Your Homework
Once you have a list of builders, how can you find out about their reputations and the quality of their work? The best way to learn about builders is to visit homes they have built and talk with the owners. 

• Ask builders on your list for the addresses of their recently built homes and subdivisions. Builders may even be able to provide names of some home owners who would be willing to talk with you.
• Drive by on a Saturday morning when home owners may be outside doing chores or errands. Introduce yourself and say you are considering buying a home from the builder who built their home. Talk to several owners, and try to get a random sample of opinions. The more people you talk with, the more accurate an impression of a builder you are likely to get. At the very least, drive by and see if the homes are visually appealing.
• When you talk to builders and home owners, take along a notebook to record the information you find and your personal impressions about specific builders and homes. Doing so will help you to make comparisons later. Some questions you can ask people include: Are you happy with your home? If you had any problems, were they fixed promptly and properly? Would you buy another home from this builder?
• Usually, people tell you if they are pleased with their homes. And if they are not, they'll probably want to tell you why.

Shop For Quality and Value
Look at new homes whenever you can. Home shows and open houses sponsored by builders are good opportunities to look at homes. Model homes and houses displayed in home shows are often furnished to give you ideas for using the space. You may also ask a builder to see unfurnished homes.

When examining a home, look at the quality of the construction features. Inspect the quality of the cabinetry, carpeting, trimwork, and paint. Ask the builder or the builder's representative a lot of questions. Get as many specifics as possible. If you receive the answers verbally rather than in writing, take notes. Never hesitate to ask a question. What seems like an insignificant question might yield an important answer.

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