"Tell lender its owner occupied" - Posted by anon

Posted by Laure on April 17, 1999 at 21:52:30:

I was just fooling around on above post! I get commercial loans for my deals. I don’t apply for owner occupied loans. Just wanted to make sure I was clear.

Laure :slight_smile:

“Tell lender its owner occupied” - Posted by anon

Posted by anon on April 16, 1999 at 13:01:58:

Met with a realtor yesterday regarding a duplex, he recommended financing it by telling the lendor it is going to be my personal residence. This way I could get a good rate with little down required. Wouldn’t this be fraudulent? What is the likelihood of getting caught and what could be the consequences?

Re: “Tell lender its owner occupied” - Posted by Rob FL

Posted by Rob FL on April 18, 1999 at 17:18:07:

Ask the realtor to sign an affidavit that he gave you this advice and that you relied on it and see if he is willing to sign it.

If he ain’t willing to sign, it shows you what he thinks about his own advice.

John A. Gotti (Jr.) is/was prosecuted for… - Posted by raelynn mitchell

Posted by raelynn mitchell on April 17, 1999 at 12:58:17:

among other things, understating (yes, UNDER-stating) his income on a loan application. Keep this in mind. His father, the Teflon Don, is currently serving 20 to life without parole.

Although there are other circumstances that make his situation different, should the sh** hit the fan in your investment career, RICO is so vague and broad that
it could create a considerable problem even for a real estate investor. Do it once, and it’s just whatever you’ve done (mislead the lender). Do it twice, it’s now a pattern, therefore may qualify as a RICO issue with MUCH STIFFER PENALTIES and bigger problems. I dunno about you, but I don’t think a shot at the cross bar hotel is worth 1/2 to 1 percent interest on a loan…

Just food for thought.

Re: “Tell lender its owner occupied” - Posted by Bill

Posted by Bill on April 17, 1999 at 10:34:19:

There are few agents who are dumb enough to suggest fraud… but when you find em, please 1. call their broker 2. Call the local board of realtors 3. call the state licensing board.

Real estate attracts great people… and a few bad apples. Let’s get the bad apples thrown out, eh?

It’s fun and rewarding to work with people who have a high regard for integrity- reward them by punishing those who trample all over it.

LOL: “Tell lender its owner occupied” - Posted by karp

Posted by karp on April 16, 1999 at 16:33:15:

One of my favorite things is hearing advice or opinions that even I WOULDN’T DO! Sort of makes me feel normal for a while…

Thanks for the laugh,


Is $$$ > Ethics? - Posted by James-IN

Posted by James-IN on April 16, 1999 at 13:29:26:


To answer your first question, “Yes it’s fraud!!!” Plain and simple, black and white.

The answer to your second question, “Most likely not.” In the mortgage business, I see all kinds of fruad going on with made up paystubs, back-dated land contracts, bogus downpayment money, etc. Rarely, do these people get caught and when they do, nothing more than a “hand slap” results.

The question to ask yourself is, “is making money greater than having ethical standards?”

Follow JPiper’s advice and do the deals the right way.



Re: “Tell lender its owner occupied” - Posted by JPiper

Posted by JPiper on April 16, 1999 at 13:11:37:

Yes…this is loan fraud. Just so that you know, this has been a “technique” for years…it was fraud then and it’s fraud now.

Will you get caught? My guess is that many people have not been caught…but some have. The lender MIGHT rewrite the loan, or they MIGHT pursue it in a more serious fashion, ESPECIALLY if you default. And before you say you WON’T default…don’t count on it. I’ve known people who made this statement who did default because of circumstances “beyond their control”.

At best this is NOT a technique you can consistently use if you buy enough property. Example…lenders won’t believe you’re going to owner occupy a $40K house when you’re currently living in a $100K house.

Why not learn to do this business the right way? There are non-owner occupied loans that you can do if you have good credit that don’t take alot down. Get a good mortgage broker…find out what’s available.


Re: “Tell lender its owner occupied” - Posted by brad

Posted by brad on April 17, 1999 at 15:28:20:

I need more proof criminal! The DOS Clause is very sleazy. Anyone who knows the difference between right and wrong would know that. Crook!!!

Re: “Tell lender its owner occupied” - Posted by Michelle D (MS)

Posted by Michelle D (MS) on April 17, 1999 at 12:00:37:

Thanks for the info and your take on it Jim. I read about a similar strategy in the Carleton Sheets course. However, an important distinction here is that the owner was deeding a small percentage to a renter to satisfy a MH park’s requirement that the MHs be owner-occupied. It was not being done to satisfy a lender’s requirement. It was considered very “creative.” I was curious about that strategy’s applicability in other situations. Thanks –

Re: “Tell lender its owner occupied” - Posted by Michelle D. (MS)

Posted by Michelle D. (MS) on April 16, 1999 at 23:22:02:

Oh great minds –

I’m new and I have a question regarding owner-occupied requiements. Because I read about and appreciate Mr. Piper’s way of doing business, I want to know what the boundaries are.

Here goes: If a loan requires a propety to be owner-occupied, can that mean a partial owner? If so, can a loan applicant deed a small ownership interest to a renter, (say, 1 percent) record it in the public record and, at the same time, receive a quit claim deed back from the renter. Once the tenant leaves the property, the owner can then record the quit claim and extinguish the tenant’s interest. I read about a similiar situation in a course.

Is this doable and is it ethical in your great minds? Trying desparately to be creative –

Brad…if you’re out there, read this - Posted by Tyler

Posted by Tyler on April 16, 1999 at 19:45:33:

I hate throw fuel on a fire that I’m happy has died down, but I couldn’t resist proving a point.

I hope that by reading Pipers post, you will understand the difference between a “technique” that is ethicly wrong and illegal, and one that is not. (Hence, the DOS argument)

In this particualar response, Piper speaks for many of us who would never think of doing something as suggested. In many ways you could relate it to the DOS, in that “the bank might never know”. The difference is that one is wrong and one is not.

Hopefully you will see just how unsleazy and repulsive Pipers ethics really are–as well as the rest of us who truly understand the difference between right and wrong.


I might add … As a former loan agent - Posted by David(Ca)

Posted by David(Ca) on April 16, 1999 at 15:43:41:

I was told by more than one lender that they periodically do “Quality Control Audits”, where they randomly pick a loan packge that has already closed and research EVERYTHING. Including things like your tax returns directly from the IRS (remember that form you signed at closing allowing them to get a copy of your tax returns directly from the IRS) and yes, owner occupancy.

You don’t have to be in default, or in any way suspicious, it can be RANDOM.

By the way, my broker at the time showed us agents the law where it said a loan agent could get 5 years in prision for simply coaching a borrower how to cheat on a federally related loan. “Federally related” isn’t just FHA and VA, it includes FNMA and Freddie Mac as well.

I personally don’t think very many people get caught, but the penalties are high, very high. I guess you have to ask yourself if 1/2% percent reduction in interest rate is worth the risk. If so, your bolder than me.

There are easier ways to make money.


Re: “Tell lender its owner occupied” - Posted by Bill Gatten

Posted by Bill Gatten on April 16, 1999 at 14:08:05:


Good answer.

A year or so ago I was sitting in the waiting room of a Re/Max office, thumbing through their company magazine when my eye caught an article about an attorney who was up against a large fine and imprisonment for Lender Fraud. It appears that the innocuous litte “Owner-Occupied” box on his loan app had been checked, and that he never occupied the property.

The article said he had tried to blame the check mark on the loan agent, pointing out that it was marked in pencil, and that the rest of the form had been filled out in ink. However, the same mark myteriously appeared on his copies. His signing was demed, therefore, constructive evidence of his acceptance of it.

I don’t recall whether he actually went to jail or not (though he may have); however, such teensy weensy little check marks can mess REAL-UP (as it were) the less than “pure of heart” investor.

Another article about a year or so ago appearing in…um… that big national newspaper (whose name I can’t think of at the moment… aging brain cells popping like toadstool spores these days), was a full-page article about Lender Fraud. It pointed out that banks are ever more dilligently and steadfastly going after fraudulent and misleading applicants without mercy: and that their efforts will be escalating in coming years.

Would I ever again check that little box to get a better rate? Nooooo. Has my pen ever accidentally slipped, checking it off by mistake and causing me to get a better interest rate? OK…well…I’ll get back to you on that.


Hello??? Anyone Home?? - Posted by JPiper

Posted by JPiper on April 17, 1999 at 17:09:43:

It’s hard to tell whether your sickness is now exceeding your ignorance…or vice versa. In either case, this is a topic regarding owner-occupied loans, not DOS clauses. You might try reading before you type next time.


Re: “Tell lender its owner occupied” - Posted by JPiper

Posted by JPiper on April 17, 1999 at 24:57:53:


I think your question provides the answer. If the loan is an owner-occupied loan, then the owner is supposed to occupy. If this were the case there wouldn’t be a renter. Some of the more recent loans require owner occupancy for one year unless circumstances arise which prevent this, and unless prior written approval is obtained from the lender. On these loans after one year you may rent the property.

Is such a clause legally enforceable? I don’t know?.it’s a question in my mind.

Owner-occupied by the way refers to the borrower, not to a second individual who you deeded an interest to and who is not on the loan.

But you bring up a separate issue, one that is not related to the owner occupancy issue. Can you deed 1% of a property to anyone?.renter or otherwise? Let’s assume for a second that you are past the time when there would be a restriction against renting. First, yes you can deed 1%. The question is whether it triggers the due on sale clause. There are certain exemptions to the due on sale clause as enumerated by the Garn St Germaine Act. Amongst these are: a transfer to a relative resulting from the death of the borrower, a transfer where the spouse or child of the borrower become an owner, a transfer resulting from a divorce or property settlement in which the spouse of a borrower becomes the owner, or a transfer to an inter vivos trust in which the borrower remains a beneficiary of the trust and the transfer does not relate to a transfer of occupancy rights. So if the transfer you are referring to involves one the above situations it would not trigger the due on sale clause. Any other situation would?.but this right to transfer is not prohibited, it simply grants an option to the lender to act under the rights conferred by the due on sale clause, one of which is to accelerate the loan.

So for argument sake let’s say you manage to persuade the lender that by deeding 1% to this “renter” that the property is still owner-occupied. Now you have in effect told them that you have deeded the property without their consent, thereby triggering the lender’s rights under the due on sale clause.

Back to the renter issue. Some owner occupied loans state that the borrower must have an “intent” to occupy the property. What’s an “intent”? And how is “intent” proven? Personally I can’t think of many reasons why someone would not move into a property if they had the “intent” of doing so?.but there might be one that I’m not thinking of. How long does “intent” translate into in terms of occupancy? Again, no answer in the documents?.a gray area.

Why any owner would choose to deed a 1% interest in a property to a “renter” is beyond me. I’m sure you must know one if you have posed the question. To me this looks like a ticket to hell and back. An interest even as small as 1% confers certain rights to the holder of that interest. Whether these rights are nullified by the execution of a quit-claim deed which is held until the renter leaves the property is debatable. What happens if the renter defaults on payment of rent, then disputes the validity of the quit-claim deed?

I’d be interested in knowing what course that you read this in, who the author was, and what the reason for this action was.


Re: “Tell lender its owner occupied” - Posted by L. Stern

Posted by L. Stern on April 16, 1999 at 23:39:42:

What about having your young-adult children occupy a unit…would it then be owner-occupied?

Re: Hello??? Anyone Home?? - Posted by JohnBoy

Posted by JohnBoy on April 17, 1999 at 17:47:10:


I think he likes you! :slight_smile:

Re: “Tell lender its owner occupied” - Posted by JohnBoy

Posted by JohnBoy on April 17, 1999 at 11:51:49:

Here is one thought that comes to mind on having “intent” to occupy?

You apply for a new owner occupied loan on a house you found that you claim you have intentions on moving into. You currently own and occupy the home your living in now. After you close on the new home, your now stuck with two homes in which your suppose to be occupying. The original “intent” was to sell the home you currently live in and move into the new home. Only your “intent” doesn’t seem to go the way you intended it to go. For some odd and strange reason you aren’t able to find a qualified buyer to purchase your current home and now your facing two mortgage payments.

You tried your best to sell your current home, but for some reason you just couldn’t get it sold. Maybe because you were asking to much or maybe your not very good at marketing a home and were to cheap to pay a realtor 6% of your homes value to sell it for you. Who knows? But unfortunately the closing on your new home has come and gone and your about to get stuck with two mortgage payments. What does a person do now? Well luckily someone happens to come along and is willing to rent your new home from you while your trying to sell your old home. But now your suddenly faced with another problem. You signed a lease with your renter for a year so selling your old home now would mean not being able to move into the new home until your lease expires with your renter. What should a person do now?? Hmmm. I guess I’d better take the old home off the market and maybe try again next year about three months or so before the lease expires with my tenant. But wait! Do I really need to bother next year to carry out my original intent? The mortgage says I only had to occupy for one year before I could rent the home out to someone. Hmmm. Since I seemed to of ran into a hardship with not being able to sell my first home and was facing two mortgage payments which just happened to interfere with my original “intent”…who ends up with the burden of proof on what ones “intent” really was?? Hmmm??? lol

Of course if a person was to look like this was an on going problem buying homes one after another it may start to look obvious as to what your real “intent” is. But one here and one there might be a case of where your “intent” was valid and things just sometimes don’t work out the way we may have intended them too! :slight_smile:

Re: “Tell lender its owner occupied” - Posted by Laure

Posted by Laure on April 17, 1999 at 08:20:20:

AW… come on. I just applied for 4 owner-occupied loans all at the same time, all with the same banker. You mean he won’t believe me ??? He’s gonna think I am going to rent them??? LOL

Laure :slight_smile: