What is considered Short Payoff Fraud?

[Eric M.]

BP member Scott Hubbard posted the Freddie Mac link below in another thread but after reading it, I thought it was important enough to highlight it on its own. To me, it was pretty eye-opening as to what Freddie (and probably other lenders and quasi- lenders) considers to be fraud.
This gives a very clear example of what it considers fraud. And unfortunately,when we are honest with ourselves, I believe that alot of us here are possibly doing it or are perilously close to it. We can try to justify not wanting to disclose higher offers or profit margins, but this makes it clear that by doing so, you are running a big risk.

A few years ago, alot of people tried to justify lying on stated income loans, lying about owner occupancy and other shortcuts as normal operating procedure. At the time, it seemed ok cause everyone was doing it, but after the fact it was obvious it was fraud and some people have paid a big price.
I wonder if we are setting ourselves up for another of those by convincing ourselves that short sale flips are ok. The common thinking now is that as long as you disclose the intent to sell at a profit, you are covered. But to me, this web page (and other things like the recent Colorado anti-flip law) says that is not enough. You must specifically disclose a higher offer. The thinking about flips seems to be still changing and evolving and what we thought was ok just weeks or months ago, might really not be ok.
Just getting flips approved and closed does not make it go away, they can come back years down the line and accuse us of fraud.
What this web page doesn't address is what the penalties are or how or if they will enforce this opinion of what fraud entails.
And to be sure, this is simply an opinion. It is not a law or a court case establishing the exact guidlelines of fraud. But do you really want to test them? Do we really want to be looking over our shoulders for years wondering if what we did to close that deal last year will come back to haunt us?

This has definitely given me pause and is making me think about my involvement in flips.

http://www.freddiemac.com/singlefamily/news/2010/0412_payoff_fraud.html

[Bill Gulley]

I will review the site mentioned, but had to answer the question first....yes, I do wnt it tested! Before I go to the site, just want to say that me making a profit on a house bought at a foreclosure or as an REO or even at a short sale is not any diffent than a used car dealer buying a vehicle under the same circumstances! Let's see what the big banks are complaining about since they want all the money on the table, but don't want to take the responsibility to earn it!