CNBC’s Diana Olick reports that the foreclosure short sale market seems to have become a breeding ground for fraud. According to her sources, the fraud is allegedly being perpetuated by agents of, yes, the big banks. What’s basically happening is that for homes with two mortgages, the 2nd mortgage holder is often demanding a short sale buyer (a short sales occur when lenders agree to let home owners sell their properties for less than the mortgage balance) pay them in cash on the side without reporting the transaction.
Paying 2nd lien holders without proper disclosure and not report it it’s obviously against the law. But what’s interesting here, besides the fact that this type of fraud seems to be happening on an ongoing basis where the agent accepts a contract for a lower price because of friendship or kickbacks from the lower bidder, is that nobody in the industry is taking action to weed out those who participate in this type of action. But then again, how can one weed out the likes of BofA (BAC) and Citigroup (C).
