Legal Question in Real Estate Law in California
Loan-officer fraud?
In 2005, I sold my home. I ended up carrying paper (2nd after the first). My question relates to the way the loan officer handled the sale, whether he committed fraud; and if so, where I can report him so that he doesn’t do this to anyone else.
The buyer’s loan officer was my girlfriend’s brother, when he set up the buyer’s loan he told me that he needed me to increase the sale price of the home to $430,000.00. He then talked me into carrying the 43,000.00 note, and secured the buyer a loan for 389,000.00. He told me that the buyer had the income and credit history to support borrowing that much money (not true).
When I agreed to carry paper, he told me that we couldn’t record my trust deed until after the first loan had funded because the “loan has to fund before we can move forward.” I now realize that what he had done was misrepresent to the lender that the buyer had put 10% down which is why I was carrying paper worth exactly 10% of the purchase price. (and why my note was signed and recorded after the sale was complete).
Was this fraud? It seems that the lender and the buyer were both defrauded by his actions
2 Answers from Attorneys
Re: Loan-officer fraud?
If the buyer defaults then you will not be able to collect on your note. If that happens you will have damages and will have a case. Contact me directly.
Re: Loan-officer fraud?
Yes, it was fraud. Moreover, this is the conduct which is causing the collapse of the subprime market, etc. The buyer was also a party to the fraud because somewhere along the line they stated under penalty of perjury that they were making a down payment which included the 10% they borrowed from you! The parties who were harmed were the holder of the first trust deed loan, who would NEVER have made the loan had they known the buyer was putting little or nothing down, and likely you, because you hold a piece of paper which is potentially worthless as there is less equity in the property and thus little to secure your loan. Also, when a buyer puts zero down they are more likely to walk away from the property when the value goes down or the payments adjust and go up, because they have zero invested in the property! You did not do anyone any favors (except for the loan officer who got a commission on the loan), least of all yourself. The buyer should never have qualified and will have a tough time in the coming market; there is a REASON why buyers are required to have a healthy down payment, and rather than get ahead of themselves and make false statements in loan applications which may come back to haunt them, buyers should wait until they have saved enough to do it legally! You can report the loan broker to the Department of Real Estate and you can report the facts to the lender also. In addition, if the buyers default on payment of the first trust deed loan, they have the ability to pursue the buyers and the loan agent for damages.
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