If you’ve attended any of our Short Sales presentations, you know this, because we talk about it a lot…but just in case you missed it, Freddie Mac is now making it clear that they are aware of and are taking steps to prevent Short Sales fraud.

From an April 12 press release on their website:

There are many variations of short payoff fraud. The example below is just one way this type of mortgage fraud can occur.

  • A seller (delinquent borrower) owes $100,000 on a property that is worth $80,000.
  • The short payoff facilitator negotiates with the bank to accept a $70,000 offer to purchase the property. In several instances, Freddie Mac has seen that this offer will be made directly by the facilitator or through an entity under his/her control.
  • The lender/investor accepts the offer for $70,000.
  • The facilitator neglects to disclose to the lender/investor that there is an outstanding offer between the facilitator and a second end-buyer for $95,000.
  • Both transactions close on the same day with the net difference being pocketed by the facilitator and increasing the lender/investor’s net losses.

At first glance, this may look like a legitimate short payoff. However, in this example, the fraud is the failure to disclose the second, higher offer. The facilitator is willfully withholding important information the same way a scam artist would, and the lender does not realize they are walking into a premeditated short payoff fraud scheme. Because the facilitator is deliberately withholding the higher offer, Freddie Mac also experiences a larger than necessary loss on this sale.



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