This article in today’s NY Times makes reference to banks being reticent to approve short sale because of a fear of fraud. This is not the first I have heard the concern, and while any fraud is wrong, the argument is a straw man excuse to not streamline the process. Are there fraudulent short sales, where a family member buys and rents back, or an investor is flipping the house at a below market purchase? Yes. Should that ruin it for the 99% of the rest of the people? No, of course it shouldn’t. It is like being against health insurance because there are hypochondriacs out there.
A very small percentage of short sales are fraudulent.
Per the Times:
Concerns about fraud are one of the reasons lenders are so careful about short sales. Sometimes well-off homeowners want to portray their finances as dire and cut their losses on a property. In other instances, distressed homeowners try to make a short sale to a relative, who would then sell it back to them (a practice that is illegal). A recent industry report estimates that short sale fraud occurs in at least 2 percent of sales and costs banks about $300 million annually.
So 98% of the people should suffer? You’ll probably see the similar percentages on shoplifting. Should we close the malls?
It is just another excuse to not do the right thing.
$300 million is a drop in the bucket compared to the massive amount of wealth that has been plundered by the banks’ own fraud and deception. I’ll say it again: In the New York area, and Westchester county, where I am based, the property values are enormous and the dollars at stake for the regular borrowers facing foreclosure are enormous. They need to be treated right and presumed innocent.
