As a Mortgage Broker in Florida (Palm Beach Gardens)I thought I have seen many things in the Industry until now. With property values dropping and the Lending Industry tighten their belts. In addition, most Lenders are now requiring down payment on your home Mortgage.
With all of this going on it seems companies have been popping up to "Help You" with your Down Paymenton your new home. Below is two companies that is trying to signup with Mortgage Companies. (Please note I will not list the company but I will list the details of the transaction)
1. Have your borrower pre-approved for a loan that does not require the seasoning of funds to close. This will let you know what LTV the buyer qualifies for.
2. Use (blank) calculator to see how you need to structure the deal to make it work.
3. Have the buyer start looking for a home. Keep in mind that the buyer will have to find a seller that is willing to use the (blank) program, and is willing to part with some of the equity in their home in order to expedite the sale. This is a key ingredient in the process. The program relies on the fact that the home is worth more than what the seller is willing to walk away with.
4. Once the buyer finds a home, run the (blank) calculator again to see if the deal works with the exact figures.
5. Print all of the forms and get the Realtor to write the purchase contract with the addendum disclosing the use of this program. When the parties sign the purchase contract, have them also sign the buyer's and seller's contracts and escrow instruction letter.
6. Fax a copy of all the required documentation to (blank).
7. The loan officer must get a check from the buyer made out to (blank) for the exact amount of the funds to be given to the buyer. The check will be held by the loan officer until the transaction is completed. Once the buyer fulfills their obligation according to contract, the check should be returned to the buyer. If the transaction does not close, the check will be sent to (blank) as repayment of their obligation.
8. (blank) will wire the funds to the buyer's checking account.
9. The title company will add (blank) to the seller's side of the HUD and send (blank) their funds upon closing of the transaction.
10. Find another deal to send to (blank)
Now for the Second company. This is an e-mail that I received.
I have PRIVATE MONEY to lend, only for CREATIVE FINANCING.
I will bring the down payment to closing, get my down payment assistance back at closing plus my fees 5-15%.
I ONLY DO DOWN PAYMENT ASSISTANCE. THANKS.
Now, I am looking at this from Licensed Florida Mortgage Broker side. We are licensed to be the Middle Man (sorry ladies... middle person) to be the clients representative but also the Lenders as well. So if the Lender is requiring a Down Payment their must bea reason. So technically it is not borrowed funds but it is miss representing your down payment to the Lender. Now one step further the way I see this is if the Licensed Mortgage Broker has knowledge of this isn't this fraud? Also you are asking the Realtor in my opinion to commit Fraud as well. Because they will have to raise the sales prices to cover the down payment.
Please remember their is No Free lunch anymore. The Lenders and the Government are very strict.
For More Mortgage Info: Mortgage Advice in South Florida
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Full-Time Mortgage Broker in South FL. Palm Beach County. Specializing in Hard Money / Private Money, Foreign Nationals, Jumbo and Super Jumbo Loans. In addition I work with Today's Premiere Lenders.
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Matthew
The minute you begin questioning the particulars of a transaction, there's something very wrong about it.
Run like hell from this one!
Ed, I agree with you.. But I have had several e-mails about this and I do sometimes advertise on Craigslist. They have a lot of this type of stuff listed. Thanks for your comment
Matthew,
Both of these schemes sound like real trouble to me. Fraud it is. Being creative is one thing, but being dishonest and acting in a fraudulent capacity is another.
This is just the type of thing that has perpetuated the current issues we are facing with real estate today.
Thanks for an enlightening post. I appreciate this information. And rest assured...if I have a buyer show up with a letter from a mortgage broker that outlines anything remotely resembling this type of program, several things will happen. Buyer will be told that they could be held liable in this transaction, they will be made aware that I don't risk my license for anyone. And then I will have to talk to someone about the MB that is willing to participate in this. Just makes my blood boil.
Matt, Run for the freakin' hills or yes, officer I know, hands behind my back!
Carol, I agree with you "Being creative is one thing, but being dishonest and acting in a fraudulent capacity is another" I am glad you liked the post. I am with you about getting upset.
Marc, Hills in Florida? All we have is overpassed and dumps..lol You are right though run away
Something about putting your own money into the transaction makes it feel like you are invested in the property.
hhhhhmmmm, sounds like jailbiat to me. I'm surprised that I have not seen those advertised yet, but I'm sure I will. Thanks for the update.
Sean Allen
The first example sounded like a typical Nehemiah or Neighborhood Gold program until I read that the buyer has to give the lender a check. Red flag!! The 2nd example is downright laughable and in the eyes of someone who isn't a mortgage lender, probably illegal as well.
Yesterday I received an email from a mortgage lender in my area detailing how the "declining values" tag on appraisals has been affecting mortgage processing. His solution: Use FHA. Heck, I've known that for years! After I read it though I started thinking about all the "creative" ways we are now going to be bombarded with by unscrupulous people to get around underwriting. Is it going to be an interesting year ahead? Most assuredly.
Terry, I agree with you.. Something about your own money.
Sean, I am surprised they haven't sent you the emails yet... I am sure after you this you will get it now..lol
Kris, I don't think we are going to be able to get around Underwriting anymore..lol At least for awhile now..
Matt, The fraudsters are certainly coming out of the wood work. I'm afraid it's going to get a lot worse too. What these folks are doing is illegal no doubt about it.
Unless you are trying to avoid the PMI, down payment funds are nothing more than a sunk cost that should be avoided.
Bryant, I am afraid you are right.. I agree with you.
Scott, I see what you are saying but I am thinking more of the sub prime where their is no MI but the rates are nasty anyway. Most of that market now requires 15% down. Because these are higher risk loans. You are right thought about the down payment funds though
Matt,
This has to be illegal. It's not much different to me than the one's who want the addendum to say it's OK to "cash-out!" LOLOL
Oh and Matt, how/where did you get that copyscape thing, that is great!
Matt,
Thanks for shining the spotlight on this. Why not put the name out there?
Mike in Tucson
Maybe an email would be better Mike, we're not here for issues...JMO.....
Karen, Just click on that and it will take you to the site.
Mike, Whenever you write online is online forever. I do not want to give credit to these companies. I just want to show what is out in the industry right now
Matthew - that was interesting and informative - thanks!
Bill & Barbara, Thank you. It is amazing to me how someone is always trying a new angle
Another great post from an AR legend. Great job Matt. The photo really sends a great visual. soo true!!
Lewis, Thank you.. not sure I would say a legeng..Thank you...
LOL, not ready to be a legend...aka...legeng...yet? LOL! This is a great post Matt...email....
Karen, Noooooooo... No Legend... Thank you...:-)