It was reported this week that CoreLogic a mortgage data aggregator has lanched a new program to help lenders find potential short sale property flops. The program is designed to alert the mortgage lender when more than one person has applied for a loan on the same property.
In a post written last fall Welcome to Short Sale Flopping, I mentioned the FBI was beginning to take look at the growing monetary loss of short sale flops. In Northern Virginia the FBI has been investigating investment groups and real estate agents who are involved in questionable short sale transactions to determine whether fraud is playing any part in some short sale transactions.
So what constitutes a questionable transaction? Certainly I am not an attorney but reading a number of articles and FBI press releases there seems to be a common theme to the investigations. A home is purchased for below market value and before the first transaction has closed a second buyer is lined up to purchase the property (with no improvements) at a higher price. Making a profit isn’t the issue but failing to disclose to the homeowner and the lender that the property is worth considerably more may be considered fraud.
In some ways the roll out of the new software now is a bit like closing the gate after the horse has left the barn. A few lenders have no started adding language to their short sale approval letters that state the buyer may not resell the property within a certain period of time. However with homeowners facing slow price recovery on neighborhood properties, making sure they are being sold for fair market value is at least a step in the right direction.
For more information on CoreLogics new program and short sale flopping you can read the entire article Program Snoops for Short Sale Flops on Inman Connect. I’ll keep watching the FBI reports to see if how many Northern Virginia real estate agents may end up in the net.