- GPS Based!! This means while you are driving through a neighborhood, the app will update as you move, showing you the current Homes For Sale right in your area!
- MLS Data Based!! This means the information shown will have Acurate Status & Pricing, as opposed to Trulia & Zillow non-broker based apps.
Lenders on the Lookout for ‘Red Flags’
Lenders require endless amounts of paperwork when processing a loan for a Home Buyer. Lenders have suffered huge losses in recent years due to fraud. Fraud has become even easier due to computers. Red flags on a loan alert the lender that there could be a problem. Most of these can be cleared up by the borrower, but it’s not always the case. When multiple red flags occur on a loan, the lender starts suspecting fraud. Everything the lender asks for has a purpose. The bank statements not only show assets, but a pattern of spending, as well as direct deposits of income, and overdraft expenditures. It is very important the lender verify you have enough funding for the down payment and closing cost, as well as where those funds came from. Income is verified by W-2′s or 1099′s, tax returns, pay stubs, and verification of employment. The lender will also order transcripts of the tax returns from the IRS, this is to confirm the tax returns submitted by the borrower are the same ones they filed with the IRS.
Credit reports not only show the lender the credit scores, but also how much debt a borrower has, and how they use the credit they are given. It can also show outstanding judgements or liens, and possibly debts that the borrower did not disclose. Fraud has become so rampant, that even Lender’s employees are required to take repeated training on recognizing fraudulent documentation.
Short Sales, Property Flipping, Equity Skimming, Identity Theft, and Phantom Sales are other ways fraud can take place. Property Flipping has become very popular, and there are two types of fraud that can occur with flipping. Inflated values can occur when an appraisal is done based on the proposed improvements to the property, but then all of those improvements are actually made. The use of a Middleman when selling the property is the other fraudulent activity. Sometimes the borrower thinks they are buying the property from the Seller of the flipped property, but in reality, the person selling the property is known as a middleman. They are bringing the actual seller a buyer for a fee. Both the buyer and the owner of the property as well as the lender are victims of this fraud.
“Buy and Bail” is another common fraud item. When properties lost so much in value, and in some cases the borrower owed more than the value of the property, frustrated home-owners didn’t want to keep making payments on a home that had lost so much value. These home-owners typically had good credit, and were able to qualify for a new property by telling the lender the old was going to be leased, and using the rent on the property as income for help qualifying on the new home loan. Once the borrower is approved, they often let their other property go into foreclosure. While this seems like a simple way out of a difficult situation for many home-owners, it is actually fraud, and lenders suffer huge loses from the Bail and Buy Borrowers.
As a result of these fraudulent activities, lenders have tightened regulations regarding buying a property when you own another property all ready. With lenders carefully watching for fraud, borrowers should be especially careful with the documentation they provide a lender to make sure that everything is correct and that no red flags will be raised with their loan. Once a red flag appears, a loan can be delayed and the lender will be watching that file for other red flags.
Fraud in lending not only hurts lenders, but also borrowers. In some cases potential buyers may not be able to qualify for a property because regulations have tightened so much due to fraud. Do your best to not raise red flags in lending!