As a homeowner, there are few things that are more frustrating and upsetting than facing a possible foreclosure. Yet this is an experience that many people have had to go through over the last several years. Whether the fault lies with poor financial decisions or the housing crisis that the United States is still recovering from, short sales have been one of the options that have provided underwater homeowners a life line. Short sales can work to the benefit of the seller as well as the potential buyer: the seller is able to walk away from the home (and their debt) without having to face the damage that a foreclosure would do to their credit. The buyer gets to purchase the home, usually at a reduced price.  

Due to this dual advantage, both can easily fall pretty to unethical banks that attempt to defraud lenders. If you are discharging your debt through a short sale, be wary of scammers, as you can be held partially responsible if you sign off on paperwork that you know to be false. The best way to avoid trouble while going through a short sale process is to enlist the help of an experienced short sale attorney. At Reinherz Law, we can provide you with the representation and assistance that you need.

Mortgage fraud can happen in a lot of ways, but short sales are particularly vulnerable to unethical actions, particularly when there is a second lender that was involved in the original home sale and who will engage in shoddy behaviors in order to avoid a total loss on the property. What is most frequently seen is that a home buyer will have purchased a home using both a primary lender and a secondary or junior lender using an 80/20 split. When this happens and the short sale is set up for less than the amount of the primary loan, this leaves the secondary lender in a position of having to give their approval to a short sale from which they will receive little to no benefit.

Though the primary lender often agrees to give them some of its proceeds in order to encourage them to grant approval to the short sale, this does not always happen or the secondary lender may try to negotiate a secondary agreement with the buyer or seller in order to get more from the deal. This additional cash can be hidden from the primary lender in several ways, including having the real estate agent pay them directly out of their commission or having the buyer or seller pay them separately after the transaction closes, but this is illegal because the money is not reflected on the transaction paperwork.

In order to avoid becoming trapped in this type of unethical or illegal transaction, consult with the attorneys at Reinherz Law today. Contact us online or give us a call to find out how we can help.