Re: Is this kosher or lender fraud?? - Posted by Jim Upchurch
Posted by Jim Upchurch on April 26, 2001 at 15:16:06:
There is no mystery to what I propose. First, let me explain why I asked her to email me for the details.
In a response to a post earlier this month I gave a detailed answer to a question that was asked and ended my post by giving my company name and phone number. In addition, I asked the original ?poster? to call me if I could help. After posting my response, I received an email from you stating my response was not permitted under the rules of this board. In addition, you edited my email by removing my company name and phone number and inserting text resembling something to the effect of ??please email me if you have any questions?? you also suggested I use that ?email me? closing in the future.
Just like you, I am in the mortgage business and earn a living providing financing to qualified buyers. In fear of violating the rules of the board and having my response edited by you again, I took your advice and asked Judith to email me.
Enough of that - let me explain what I was proposing to Judith.
First, after reading her post, I was under the impression she was actually trying to purchase the property with no money down by having a ?fake? seller second. Assume the appraised value is $100,000 but the seller only wants $80,000. Most lenders base the LTV off the lower of the appraised value or the sales price. In this case, assuming the sales price was $80,000, and Judith did not want to go over 80% LTV she would have to come up with 20% of the $80,000 or $16,000. As we both know, this can be in the form of cash, gift from relative, seller second or numerous other ways. Again ? my intention was to get Judith in the property with no money down.
My proposal was for her to purchase the property for $100,000. Knowing the seller only needs $80,000, she will obtain an 80% loan (based on the sales price of $100,000) in the amount of $80,000. For the remaining 20% or $20,000she could use a ?gift? from a non-profit organization such as Nehamiah, Ameridream, HART or The Buyers Fund instead of a ?fake? seller second that would be torn up after closing and is highly illegal. You could use a gift from a relative, but not everyone has a relative with $20,000.
At closing, the down payment assistance company would wire the $20,000 to the closing agent from an existing pool of funds. On the HUD-1, the closing agent would show the down payment as a credit for the borrowers. In addition, the HUD-1 would reflect a debit from the sellers funds for a donation to the down payment assistance company, to replenish the funds for future borrowers, in the amount of $21,000, original $20,000 plus 1% ($1,000) of the sales price as a fee.
In this case, the seller would net $79,000 at closing. By increasing the sales price to approximately $101,000 they would net $80,000 ? I used $100,000 for easy math and to simplify things but I think you will get my point.
This is another example of creative real estate financing. There are several other ways to structure the deal. This way the buyer ends up with 100% financing and it is 100% legal.
As you can see this post is quite long. I could have explained this to Judith on the phone in a fraction of the time it has taken me to post this response but I felt compelled to respond to your post.
Not a mystery ? just trying to save time and conform to the rules of the board.
Thanks again for your response and for providing this forum to share ideas.