Talk about big time penalties... - Posted by Roger

Posted by Bud on June 30, 2001 at 11:52:24:

The code section is pasted below, from the Cornell Law site. Fraud has always been illegal.

Sec. 1014. Loan and credit applications generally; renewals and discounts; crop insurance

Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the Farm Credit Administration, Federal Crop Insurance Corporation or a company the Corporation reinsures, the Secretary of Agriculture acting through the Farmers Home Administration or successor agency, the Rural Development Administration or successor agency, any Farm Credit Bank, production credit association, agricultural credit association, bank for cooperatives, or any division, officer, or employee thereof, or of any regional agricultural credit corporation established pursuant to law, or a Federal land bank, a Federal land bank association, a Federal Reserve bank, a small business investment company, a Federal credit union, an insured State-chartered credit union, any institution the accounts of which are insured by the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, any Federal home loan bank, the Federal Housing Finance Board, the Federal Deposit Insurance Corporation, the Resolution Trust Corporation, the Farm Credit System Insurance Corporation, or the National Credit Union Administration Board, a branch or agency of a foreign bank (as such terms are defined in paragraphs (1) and (3) of section 1(b) of the International Banking Act of 1978), or an organization operating under section 25 or section 25(a) [1] of the Federal Reserve Act, upon any application, advance, discount, purchase, purchase agreement, repurchase agreement, commitment, or loan, or any change or extension of any of the same, by renewal, deferment of action or otherwise, or the acceptance, release, or substitution of security therefor, shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both. The term ‘‘State-chartered credit union’’ includes a credit union chartered under the laws of a State of the United States, the District of Columbia, or any commonwealth, territory, or possession of the United States.

Talk about big time penalties… - Posted by Roger

Posted by Roger on June 29, 2001 at 19:01:56:

…if you inflate the purchase price to cover buyers closing costs, and I know at lot of folks do, you might want to consider this:


Federal law, 18 U.S.C. §1014, provides that anyone who knowingly makes a false statement or willfully overvalues property with the intent to influence a lender is guilty of a felony, punishable by a fine not to exceed $1 million and up to 30 years in jail. Case law holds that the lender need not even rely upon the overvaluation for the crime to occur. Nor does it matter that the loan is based exclusively on the property’s appraised value.

Of course nobody here has ever done this.

Let me reprint the entire text… - Posted by Roger

Posted by Roger on June 29, 2001 at 23:32:29:

?I found this at http://www.profpub.com/litignz.htm. This is a VERY common practice with consequences that I don?t think most people appreciate:


Manipulating the Purchase Price for Loan Purposes

Some agents are still participating in the practice of having the buyer and seller agree to an increase in the purchase price to facilitate a better loan to the buyer. The difference in the paper price and the real price is rebated to the buyer as “credit for nonrecurring closing costs;” a “deposit made outside of escrow;” or some similar device. The agent’s commission is usually based on the real purchase price. In recent transactions this amount has reached a $100,000 or more.

While the guidelines for Freddie Mac and Fannie Mae loans do permit the seller to pay some of the costs ordinarily incurred by the buyers, the amount is limited from two to four percent of the purchase price, depending on the type of transaction. It is also required that the amount not exceed the buyer’s closing costs and that the seller actually pay these costs.

Federal law, 18 U.S.C. §1014, provides that anyone who knowingly makes a false statement or willfully overvalues property with the intent to influence a lender is guilty of a felony, punishable by a fine not to exceed $1 million and up to 30 years in jail. Case law holds that the lender need not even rely upon the overvaluation for the crime to occur. Nor does it matter that the loan is based exclusively on the property’s appraised value.

The face that the “credit” or “payment outside of escrow” is known to the lender, the broker, and the load broker involved does not relieve either the parties or the brokers from liability for violation of the deferral law. One case even held that it is no defense if the overvaluation is made on the advice of the bank officer. While reliance may be an essential element of common law fraud actions, reliance is not an essential element of the crime of bank fraud; the crime is one of subjective intent that does not require actual reliance by the bank.

It has been successfully argues that where there are credits to the buyer for the sole purpose of inflating the purchase price, the contract is void and unenforceable. This means that the brokers were not entitled to receive a commission and could be subject to disciplinary action by the DRE.

Let us not go there.

Re: Talk about big time penalties… - Posted by Mr. Seller

Posted by Mr. Seller on June 29, 2001 at 21:38:29:

How would increasing a price to cover your own costs have any influence on a lender???

Perhaps what you mean is if you cause an increase in appraised value that is false to collect more than what a property is truely worth?

Anyone can sell anything for any amount they choose, regardless of its actual value. If I own a property that is only worth $100k and agree to sell it to you for $200k and you agree to pay that much, that has nothing to do with influencing a lender. That is what I agreed to sell for and what you agreed to pay, period!

Now if I we were to somehow influence a lender to base their loan on the $200k purchase price by somehow influencing them that the true value of the property is $200k when it is really only a $100k, THAT would be intent to influence the lender.

Regardless of what price buyer and seller agree on, the lender is going to base their loan on the value of the property and the buyer’s ability to repay. The lender wouldn’t be likely to loan based on the purchase price in this case, they would loan based on the appraised value. This doesn’t mean the lender won’t do the loan because of how much you’re paying, they’ll do the loan based on their own criteria. Anything above that would have to be paid out of pocket by the buyer.

In other words, don’t get involved with falsifying appraisals and/or lying on loan applications for the purpose of getting a lender to either approve the loan or loan more money on a property or both.

I couldn’t resist - Posted by Bud Branstetter

Posted by Bud Branstetter on June 29, 2001 at 21:31:12:

Roger, So what are you saying? That a willing buyer and a willing seller overvalue the property and the lender’s appraiser agree with them on the value. Or are you saying that a property is never sold undervalue and they can not agree to that if it where sold at FMV then the seller could pay part of the buyers cost.

If doing that bothers somebody then they should’nt do it. But why make an insinuation unless you have a specific point.