Is this legal or ethical?? - Posted by GerryH VA

Posted by GerryH VA on March 19, 2002 at 10:50:01:


I already got slammed in the Mobile home discussion group. I guess I was coming from an engineering standpoint (which I am) not a lender or even investor standpoint. If the dang thing is worth more than what I bought it at, and the bank wants 80% LTV, than what really is the value, what I bought it at or what the street value is. But now I understand from the lender stand point. No need for further discussion.

And no I don’t really want to lie and cheat anyone, just legally bypass the system if it was ethical. It would be ethical if the bank was still getting thier 80 percent LTV if the value was the street value not my investment value, but I understand now it is my investment value not street value. Honestly, I never have been exactly sure how this works before as I have only bought with cash before this. Now I also understand that an appraisal is insurance for the bank not necessarily the street value of the property. I have been enlightened.


PS: By the way, I called and emailed you regarding another issue and not have received anything back from you. If you could call me that would be great. 434-941-7563.

Is this legal or ethical?? - Posted by GerryH VA

Posted by GerryH VA on March 18, 2002 at 22:11:01:

I buy used mobile home/land packages to rent. Anyone who has tried to buy one of these realizes that not all loan options are available for these deals compared to buying a single family home. Mainly, I have had trouble trying to refinance these homes even at 80% LTV. However, I do buy them for less than they appraise for so my question is…

Is it legal and/or ethical to buy something (for example) at 50,000 and tell the bank you bought it for say 62,500…if the property appraises out for 62,500 then work something out with the seller saying that you gave him 20 percent down and then get a loan for 20% LTV from the bank with no PMI. This minimizes or eliminates your cash down except maybe for closing costs.

Technically, all the seller is worried about is his $50,000 and all the bank is worried about is the 80% LTV. If this can work, how do you protect the seller so he does not have to pay for the taxes on the additional $12,500 that he really did not recieve. I hope this makes sense. If this is legal/ethical how do you do it? Maybe there is another way to essential do the same thing but structure it differently.

Any help would be appreciated.


Re: Is this legal or ethical?? - Posted by Ed Garcia

Posted by Ed Garcia on March 19, 2002 at 10:03:55:


It’s FRAUD. Not only is it illegal, but yes, it’s unethical.

Think about it Gerry. You’ve lied to the bank or lender and made them think that you put down 20% or had the seller carry-back 20% when it didn’t happen.

The reason the bank wants the difference from the 80% is because they want the borrower to be committed to the deal. They want the seller to have an investment in the deal and have their butt on the line as their protective.

If the lender knew that the other 20% wasn’t legitimate. They wouldn’t make the loan. You know that. You want to lie and cheat them and you are asking if it’s legal and ethical?

Gerry, Gerry, Gerry, what am I going to do with you, you know the answer.

Ed Garcia