Unethical mortage lender? - Posted by Brett Schuler
Posted by Brett Schuler on May 18, 2006 at 13:08:56:
I am selling a house to my lease option tenant and am worried that the loan officer and title company are trying to sneak something by me and may be committing mortgage fraud.
The purchase price in the contract is 223,100k and the appraisal of the home is 300k. I was told that the funds were already at the title company. I was ready to close and send back notarized deed & settlement statement. When I received the documents, the HUD settlement statement said that there was a purchase price of $300k with an equity credit of over $70k. There was also a 1099-s form that has “gross proceeds” of $300k. I contacted the loan officer and told him that I thought overstating the purchase price was against the law, and regardless, I cannot sign due to increased tax liability. The loan officer played dumb and said that he was not sure why it got set up that way. He said that since they are a direct lender, they are allowed to set it up like a refinance. He then told me that he could structure it as a purchase price of $240k and I pay $16,900 in closing costs (7%). I said, I would consider it and check to make sure it worked out for me tax-wise. The very next day, they sent the adjusted HUD Settlement Statement. The 1099-S form still said $300k, but I asked him to change it to $240k and he did that for me.
This has thrown up a lot of red flags for me.
My quesitons are:
Is what they are doing legal?
How can I assure that after I sign the documents, that they do not submit the previous settlement statment and 1099-s form of $300k?
I am worried that they have changed some paperwork around for me, but they are really funding it based on the $300k purchase price.