So, the exercise of yesterday afternoon was like time travel back to the days of sub-prime.
We received a frantic call from a listing real estate broker concerned that the HUD-1 did not accurately reflect the movement of the money. Huh?
Turns out that after our closer left the table, the seller had confronted her and demanded that she pay him $800 to cover his loss. He had been forced to pay $800 because the closing was delayed. This real estate broker could not figure out what he was talking about and since he was too angry to be coherent, she left leaving hanging in the air his threat to complain to the real estate commission.
She had no idea what $800 fee he was referring to and pondered the HUD-1 for two days before calling the buyer's loan officer to see if he knew anything about it. He did. He gave her the complete story which I later heard from the buyer and seller when I called them yesterday.
There was a well issue which delayed the closing just enough to push it into the next month. A buyer who had been planning on less than $100 to close now needed $800 because of interim interest. Mind you, this was one of those cliff hanger HUD-1s. Instructions and HUD approval all came the day of closing. Here's what happened based on what I was able to piece together yesterday.
The buyer called the seller on his cell phone. The seller, who was on his way to closing - it was a two hour drive - was faced with a threat from the buyer that the seller had caused the problem and he better pay up or the buyer was walking away from the deal. The seller felt penned in and furious. He could not reach the listing agent on the phone and so conferred with the selling agent and mortgage broker who both agreed that he should get a cashiers check payable to my office and give it to the buyer before closing. The seller agreed to do this so he could move forward with his closing and expected to extract the money from his listing agent.
Now, let's pause for a moment in this story to discuss what honest real estate agents and mortgage brokers should do in this kind of a situation. Professionals are trained. Real estate agents, mortgage loan officers and brokers along with title insurance agents are trained to recognize and guard against illegal acts. WHAT DOES A TRAINED PROFESSIONAL SAY
WHEN A CONSUMER - A LAYMAN WHO MAY NOT KNOW BETTER - SUGGESTS AN ILLEGAL ACT? Let's all say it together........
Well, in this case, these two professionals, now known as scofflaws, said great idea and colluded to defraud the mortgage lender. They knew better than to tell my office, so they hid the act. When asked for funds at closing, the buyer pulled a cashiers check from his pocket. The closer reviewed it, found nothing out of order. Though the check did not show a remitter - not all do - the buyer's name was printed on the check by the bank in the memo line. The seller had taken the extra step to make it look good.
Once the full set of facts were known to us, you can imagine how disappointed we were. It's hard to find out that people with whom you have had a working relationship are liars. As the listing real estate agent explained yesterday when she called our office, the only people at the closing table who did not know what was going on were our closer and her.
We wrote a letter to the mortgage lender which was delivered by fax along with a copy of the check and HUD. Original sent to the address on the HUD. All parties in the transaction were copied including our title underwriter.
JC had chatted with the selling agent and mortgage broker before I spoke with the buyer and seller. They both insisted that knew nothing about it. I spoke with the seller and buyer and explained that what happened was mortgage fraud and illegal. The buyer insisted it was his idea and that he had not discussed it with anyone. The seller inferred that he had discussed it with either the selling agent or the mortgage broker, he couldn't remember. These conversations took place before the listing agent filled in the blanks and we knew that both the selling agent and mortgage broker were involved.
The letter prompted a call from the lender who asked plainly why folks didn't just do a work out and revise the HUD? That's exactly what the listing agent had asked. If the buyer didn't have or didn't want to pay the money, she would have liked the opportunity to consider a reduction in the commission. In this case, the mortgage broker made thousands of dollars. He could have knocked down his fee a bit. The seller had a two hour drive. We could have worked all this out with the lender and got an approved HUD without skipping a beat. But no, they had to go under the table and take the illegal route -pulling their consumers in with them.
The lender pulled the loan from their pipeline - it hadn't been pooled yet - and will get back to us on Monday with a suggested fix. They said they will contact the mortgage broker. It will likely be a modified HUD - showing basically the fix that SHOULD have taken place on the day of closing. I don't know that anything else will happen. We're waiting to see.
This is a good example of what was so common during the sub-prime fiasco. I am truly surprised that there are still players in the business acting out retro-mortgage foolishness.