Is this mortgage fraud? I was asked to provide a phony rental agreement when my house didnt sell.?

Question

At the time the buyers said that they couldnt get financed, i went to my mortgage company. I explained that the sale fell through and the house was still on the market. The mortgage company told me, after three days of research, that this wasnt a problem. We proceeded with the purchase of the new house. Now, two days before closing, they are asking for documents showing our house as being a rental property. What is the best way to proceed. My first thought is to move the closing date and find another financing company. Any ideas?

Answer 1

Seriously I'm someone who actually underwrites loans. If your current home is not under lease and you make up a lease it's fraud plain and simple. Will the lender go after you, probably not so much as your loan officer, but you are still very much on the hook if they point the finger at you.

Here's the deal...Odds are your debt ratio does not support paying for two homes and other debts. The reality is it does not matter if you have an offer on your property. Until it sells it must by Freddie Mac and Fannie Mae, as well as ALL the other alt guidelines out here must be included in your debt ratio (fyi, includes taxes and insurance on your current home). Offers fall through all the time, that is why the requirment is there. Not sure what the other poster is talking about there.

Worse case, if your credit is good enough you can try a No Ratio loan. (income not used to qualify) this means regardless of debt and expenses you probably won't be turned down unless you have a major credit issue. You will have to show additional reserves that are seasoned (money left over after closing costs, downpayment etc. at an average balance for 2 months) Under this scenario your rate will be higher.

I stongly recommend you push the closing back and find another LO. Your LO in this case is working for your interests and as well as their paycheck, since they are only paid if the loan closes. But what they just asked of you is to commit fraud so he/she gets a paycheck on it and you get the home and whatever reprocussions follow are left out in their mind until you are caught. Not worth it in this market environment. Most loans are QC'd at a rate of 10% and higher. So there is a good chance you can get nailed and the FBI involved since it is wire fraud (money from a bank or lending institution) that is obtained under misrepresentation.

Answer 2

This sounds very shady to me. I have a guess as to what is going on. Let me see if I understand correctly: You are in the process of selling your current home and buying another home? You thought you had your current home sold but the sale fell through? You are going ahead with the purchase of your new home anyway? You will, at least temporarily, own two homes? You will, at least temporarily, have to pay two mortgage loans?

My guess is that the lender wants to lend you the money for the second home no matter what. I am also guessing the lender gets a commission per loan, or per dollar, closed. I will further guess that underwriting standards say that you cannot afford both mortgages at the same time. In conclusion, the lender wants you to invent some income (rental income from the home you are trying to sell) so that you qualify for his mortgage so he can close your loan and collect a commission.

I recommend you do not do this. Falsifying a loan application is a crime. If you want to get nasty call your state department of banking, or similar law enforcement agency.

Answer 3

They are saying this because they, as the lender on your new home, are giving you the loan and interest rate based on the fact that the home you are buying is your official residence. With you owning the other home, they want something in writing saying the new home will be your principal residence. Usually at closing there are a slew of papers you have to sign and usually one or more that says the property you are mortgaging will be your principal residence. I don't understand why they are asking for a rental agreement, unless the loan company submitted the loan to their underwriters and stated you didn't own another home. I wouldn't sign anything not true - and would advise you that perhaps contacting an attorney on the matter would be a good idea. You don't want any trouble after closing. Good Luck.

Answer 4

Yep. Unless that's a valid lease from a real renter, that is flat-out fraud.

This is one of the many reasons loans go bad. What happens if it takes you another 3-6 months to sell your home? Can you make both payments? If not, which one will you pay?

If you can get your home resold quickly, it doesn't actually have to close before you buy. There's a simple process to follow, where you get something from your buyer's mortgage company confirming that there is a valid, fully approved application, and that the appraisal has been done and approved as well. Your current broker, I would bet, has no clue this is even possible. I'd recommend finding a new one.

Good luck.

Answer 5

Find another Finance Co.
If you declare the house as rental, you may have to pay taxes on any gain and not be able to apply it to the new purchase.
If you are selling yourself, hire an attorney. Hell of a lot cheaper than Realtor commissions or fraud.
This sounds shady.

Answer 6

It is fraud to give false info for the purpose of obtaining a home, or selling a home. Find a legit mortgage broker. If you are in TN, AL, FL, or KY I can do it for you.

Answer 7

There is a radio show you can listen to online that can help you with you question. Its called The Dave and J Show, listen at daveandj.com, and email them your question at [e-mail]. Those guys are very good!!!

Answer 8

don't do anything fraudulent. the law is harsh on it. and that guy might be trying to fool you.

don't do it. you could lose your house