San Ramon, CA - Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA (Real Estate Settlement Procedures Act), laws against loan fraud, and licensing laws. Short sale agents have increasingly reported to C.A.R. (Calirforina Association of Relators) about requests for agents and their clients to pay junior lienholders and others, oftentimes outside of escrow.
One common scenario is when a short sale seller's senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow. Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500). Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent's participation in the scheme may be subject to license revocation by the Department of Real Estate or other disciplinary action.
Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:
- Attorney General's Office
California Department of Justice
800-952-5225 Phone
http://ag.ca.gov/consumers/mailform.htm - Department of Housing and Urban Development (HUD)
HUD Office of Inspector General Hotline (GFI)
800-347-3735 Phone
http://www.hud.gov/offices/oig/hotline
Via: (Realegal® is published by the CALIFORNIA ASSOCIATION OF REALTORS®, a trade association representing more than 175,000 REALTORS® statewide. )
If you have questions regarding a Short Sale please contact Sam Parwiz 925-219-5144 or samparwiz@gmail.com.
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