Attorney fudges loan financials
"How to buy real estate with nothing down"How did the cash back at closing scheme work? A "co-conspirator", likely a real estate broker or loan broker, convinced buyers and sellers to write real estate contracts for inflated prices. The seller got the price he wanted and the buyer got in with nothing down and sometimes cash back at closing. What's the beef?
Since the lender required a down payment, the cash at closing had to be covered up. The cover-up was done by paying contractors twice. Their bid was likely inflated and the buyer got a kick back. In other cases, there may have been no contractor at all. The "contractor" was really the buyer. In still other cases the loan agent and even the attorney gave the buyer his down payment money from large fees they were making.
In order to keep things clean with the buyer and seller a side agreement was likely used.
“A side agreement is a side contract between the buyer and the seller which is not included in the closing documens"
Buyers and sellers and many mortgage and real estate brokers insist no money down financing is harmless. The buyer gets the property, the seller gets his sale. Real estate brokers and loan agents get their fees.
"The one who gets stuck holding the bag in zero down finance deals is the lender"
The one who gets stuck holding the bag in zero down finance deals is the lender. He thought he had a lower risk loan because the buyer had a stake in the purchase. History has shown a buyer who makes a down payment is less likely to default on his loan. When the buyer invests nothing the loan becomes more risky. Of course, the less owed, and the more equity a property has, the less risk, too. Since many loans are sold to third party investment funds, the investment fund is defrauded, as well. They purchased the mortgage loan based upon the buyer having a stake in the purchase of the property.
"There is nothing illegal about no downpayment financing"
There is nothing illegal about no downpayment financing. Buyers and sellers can still sell property with zero down financing if they wish. The crime happens when a no down payment or cash back at closing deal is done and false statements are made at the closing. If a lender, closing agent, attorney or real estate broker ask you to sign a document which is false, get up and leave. No property, no real estate investment, is worth spending 20 years in prison.