Everyone knows that short sales have gone through the roof, tripling over the last couple of years and providing more grist to the unlikely alliances of lenders and Realtors that have sprung up to handle them.
And with more and more homes losing enough equity to make them underwater loans, there will be more and more short sales as distressed buyers are unable to sell their homes for enough to pay off their loan amounts.
One of the more astonishing facts of recent years is that lenders now sell more homes than homebuilders do. That does speak to how poorly new home sales are doing, but even more to the new lender-Realtor groupings. Lenders and Realtors now routinely join to sell homes either as short sales before the default, or as REO afterwards.
All of that is part of the new reality of mortgage lending. But what's really new is a recent report of just how much fraud is accompanying the new wave of short sales.
CoreLogic, the analytical firm based in Santa Ana, Calif., says short sale fraud has cost lenders a whopping $310 million per year.
This is another indication of how clever fraudsters are at adapting to new conditions. All the (bad) energy in the mortgage fraud world has now shifted over to the servicing side, after a long and infamous run on the origination side of the business.
What's short sale fraud? Often it's a flip, and according to CoreLogic one in 53 transactions sees them (2% of all deals). In a fraudulent transaction, "parties involved in the process manipulate the short sale transaction for a profit." It can also be when an owner misrepresents their financial situation in order to qualify.
(Ironically, "liar loans" are now turning from where borrowers overstate their incomes to where they understate them.)
Still, they are popular, since as CoreLogic points out, lender losses are often much lower on short sales than REO sales, as much as 10% to 12% lower.
To learn more about this hottest of hot mortgage topics, save the dates Nov. 9 and 10.
That's when we will be sponsoring a Short Sales and REO Conference in San Diego run by our parent company, SourceMedia.
California is the state with the most short sales, according to CoreLogic, with more than 25% of the nation's total, so the meeting will be held in the heart of short sales country.
