If you are
in escrow on a
property being sold as a short sale, do not agree to any payments to a
bank to
take place outside of escrow. Full details are listed below:
UNDISCLOSED
SHORT SALE PAYMENTS MAY BE ILLEGAL
Undisclosed
payments in short sale transactions, especially those paid outside of
escrow,
may violate the law, including RESPA, laws against loan fraud, and
licensing
laws. Short sale agents have increasingly reported to C.A.R. about
requests for agents and their clients to pay junior lienholders and
others,
oftentimes outside of escrow.
One
common scenario is when a short sale seller's senior lender authorizes a
payment of $3,000, for example, to extinguish a junior lien, but the
junior
lender demands that the buyer pays an additional $9,000 outside of
escrow. Not only would it be risky for a buyer to pay outside of
escrow,
but concealing this additional payment from a federally-insured senior
lender
may constitute loan fraud, which is a crime punishable by 30 years
imprisonment
plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting
from the HUD-1 Statement any charges paid at settlement by either a
buyer or
seller may violate the Real Estate Settlement Procedures Act (RESPA)
(Appendix
A to 24 C.F.R. Part 3500). Depending on the specific circumstances,
carrying out these payment requests may also violate other laws and
regulations, and an agent's participation in the scheme may be subject
to
license revocation by the Department of Real Estate or other
disciplinary action.
Agents
and their clients are encouraged to file any complaints regarding
fraudulent
activities to the proper authorities, including the following agencies: