*YOU* are a CRIMINAL as of January 1, 2012 if you use THIS investment strategy

[pazzo]

uesday, November 22nd 2011     
Starting at the beginning of 2012, everyone involved in a short sale will be liable for “negligent or intentional misrepresentations in the transaction” and will have to sign affidavits stating that they are handling the transaction to federal standards[1]. The addition of the affidavits to the short sale process is designed to help everyone involved in the short sale “identify potential mortgage fraud and [have] a clearer understanding of the intent of all parties involved in the real estate transaction,” the GSE announced in a public statement last week. The move is specifically designed to prevent “flopping” short sales, which occurs when short sale properties are purchased from the bank at a discount, then sold immediately for a higher price. The government agency considers this practice unscrupulous because it involves at least one party having knowledge of another party willing to pay more for the property than the amount for which the bank is settling[2].

The notion that reselling property for a profit is, of course, utterly ridiculous.  But Fannie Mae is utterly unconcerned with rationality.

Although the changes to the process do not have to be implemented before January 1, 2012, the government is asking that servicers “implement the change immediately to fight fraud.” Along with the affidavit announcement, Freddie Mac also announced that borrowers more than 120 days delinquent no longer have to list their home for sale in order to become eligible for a deed-in-lieu transaction.

What do you think? Now What?

[Real Estate Seller]

It sound like the banks don't want the investors to make a profit.

[pazzo]

Apparently, the “solution” to a poorly regulated mortgage market is FULL BLOWN COMMUNISM. Outlawing profit is one of many market destroying changes Washington has used to thwart recovery. This move, if implemented will slow the market from clearing. Market clearing is absolutely necessary for housing to truly recover. So we are  “the Divided States of Embarrassment”. Outlawing profit makes me wonder.

[javipa]

Well, this is what happens when we support the elections of people like Chris Dodd, Harry Reid, Barney Frank, Nancy Pelosi and a host of other Statist-sympathizing Marxists and socialist sympathizers to office. 

Of course we've got a boatload of Republicans with the same romance with socialism, enabling this type of legislation. 

When banks are funneling money to your reelection efforts, you listen.  And as long as you stay in office, you can invest with insider knowledge with impunity... As a result, loyalties drift toward the bigger donors who help the congress maintain their personal status-quo.

Happy Thanksgiving.

[pazzo]

Well Said... Happy Thanksgiving to you as well!

[daniel08]

Javipa, so true.

[Ria]

Hi Forum,

I have a question pertaining to this new law. Pazzo mentioned that the law is designed to prevent immediate resale of short sales for a higher price. However, if I purchase a short sale, put a $1000 or so into repairs, lets say to update a bathroom, then put it back on the market within 30 days for a higher price, will I be liable for mortgage fraud under this new law?

 I'm asking because the law is based on the fact that there would be previous knowledge that someone else would pay a higher price than the bank is settling for if the property was immediately flipped after acquisition. However, if improvements are made to the property (minor or major) then can it still be said that another person would have been willing to purchase the property for a higher price given the previous condition. After all, we all know that minor renovations to a property can make a big difference in market value.

I was just wondering if this could be a way to get around this law. I realize that actually taking possession of the property and putting money into it is not ideal since financing would need to be secured to purchase the house, make improvements, and for carrying and selling cost, but is it a viable option provided that these new expenses are reflected in the sales price?

BTW, please allow me to introduce myself. Although this is my first post, I've been snooping around the site for a few weeks gaining as much education as possible. I've made the decision to commit myself to building a business through real estate investing, but I'm still learning about the markets in NYC and deciding on what niche and farm area to focus on.

[Real Estate Seller]

We get around the Freddie Mac guidelines by buying through a non profit trust.

[inve$t_]

I must have read threats like this 10x's since 2008.

Bottom line is, everyone I know who does short sale flips, does it 100% legally.

-There's always full disclosure.
-It's written in plain english that the buyer has the right to resell the property for a profit.
-If there's a 120 day hold period, transactional funding comes into play.

So I don't see how this new law will affect anything.

[pazzo]

Just that 120 days transactional funding shrink if not eliminates most of the profits in most Short Sales investors

[Bay Area Brian]

If you have the end buyer already just add them to your deal and they buy you out later or in escrow.

As for Queen Nancy, you don't accumulate a net worth of over $100 mil on a senators pay by catering to small investors, she likes bankers and wall street a whole lot more, plus she has one of the dumbest voter base areas in the country and has no trouble getting re-elected with the normal campaign BS for her area.

And she isn't going to worry about the taxpayers buck, just look at the cost of her flying home on weekends and back, just the fuel is $60,000. I could start a new company and create new jobs with that amount, plus add the cost of the plane, maintenance, pilot and crew salaries, etc.

[Real Estate Seller]

Only new investors are worried about the new law.

[Bluemoon06]

As long as the deal makes I don't see how it is a problem.  This is what I hate about when the government tries to correct a problem.  (forgive me if this is political) but they don’t know where they should shoot so they shoot at the investor.  The government sees only 2 types of people, good and bad, the bad person is anybody that makes money and the person the loses money is the good person.

All we want to do is help the goverment clean up this real estate mess and make a little money while we do it for our risk.

[Real Estate Seller]

A lot of investors do not realize that theses real estate guru selling theses books on how to do everything is causing the problems with real estate investing.

[kdhastedt]

If you have the end buyer already just add them to your deal and they buy you out later or in escrow.

As for Queen Nancy, you don't accumulate a net worth of over $100 mil on a senators pay by catering to small investors, she likes bankers and wall street a whole lot more, plus she has one of the dumbest voter base areas in the country and has no trouble getting re-elected with the normal campaign BS for her area.

And she isn't going to worry about the taxpayers buck, just look at the cost of her flying home on weekends and back, just the fuel is $60,000. I could start a new company and create new jobs with that amount, plus add the cost of the plane, maintenance, pilot and crew salaries, etc.

Queen Nancy is sad - as Speaker she got an Air Force plane to ferry her back and forth to home district and would complain if, God forbid, that plane had to stop to re-fuel...