It was only a matter of time. As we previously reported, Freddie Mac has geared up its fraud investigations unit recently. Now, we see the states getting on board. In October 2010, the California Division of Real Estate filed an action against an agent accusing him of, among other things, receiving illegal secret profits in two separate short sale transactions. The agent purportedly entered into two separate short sale listing agreements where the allowable compensation to be paid to the licensees could not exceed 7% of the sales price. However, the agent was accused of exceeding the compensation limitation by requiring the buyers to pay an additional 3% short sale negotiation fee, a fee that was concealed and not disclosed to the lenders or sellers.
The case was referred to the AG’s Mortgage Fraud Strike Force, established by California Attorney General Kamala Harris in May 2011 to investigate and prosecute mortgage fraud. On December 28, 2011 the AG filed felony charges against the agent for defrauding buyers and sellers in short sale. On April 18, 2012, the agent pled guilty to conspiracy to commit real estate fraud. The licensee was required to surrender his real estate license, serve 90 days in jail, pay restitution of approximately $25,000, and be on formal probation for three years.
PRACTICE POINTER: Las Vegas Real Estate Agents – be careful out there! My experience is that most agents know when something smells fishy and you need to listen to the little voice that tells you to proceed with caution. Both federal and state authorities are gearing up their scrutiny of short sales transactions and this area will undoubtedly become an even greater source of potential problems for licensees.