Con artists and other opportunists used this building as a vehicle to commit rampant fraud in what are commonly known as cash back at closing deals.

With cash back at closing, buyers, sellers, appraisers, real estate agents, and other real estate professionals often conspire to inflate the value of a property to fool a lender into approving a loan that grossly exceeds the true market value of the property. The buyer receives the excess proceeds, the sellers are able to sell their property for close to their asking price, the real estate agent receives a higher commission based on the inflated price tag, and the appraiser is rewarded with another satisfied customer.

These cash back at closing schemes have become very popular during the latest housing boom, because they seem like "everybody wins" deals. On the surface, even the lender seems to win -- loaning more money and earning more interest over the life of the loan. Unfortunately, however, when the housing bubble bursts, someone gets stuck holding the bag -- the lender. And when enough lenders get stuck holding the bag, they simply pass the costs on to investors, homeowners, and taxpayers. The only winners are the con artists who rake in the cash at the closing table.

Real estate professionals and homeowners need to keep in mind that cash back at closing is wrong, however right it may seem when someone pitches the idea. They also need to keep in mind that cash back at closing is just one of the many schemes that con artists use to rip off the system.

Cash back at closing is a national problem. It is occuring everywhere around the country.

What I don’t understand is HOW the LENDERS (prime and subprime) allowed it to occur. Cash back at closing for a buyer has always been AGAINST all mortgage programs whether they were conforming (Fannie Mae and Freddie Mac) or Sub Prime.

I have been questioned on this topic many times this past year by realtors as well as mortgage brokers. My advice has always been and will continue to be “STAY AWAY FROM THOSE KINDS OF DEALS”. Mortgage 101 always taught this so even the novice should have known.

However, greed has had a way of bypassing guidelines. The lenders seemed to have looked the other way during the underwriting phase, approved then FUNDED these loans. Of course, many mortgage brokers, more out of hunger then greed, processed these loans believing that if the LENDER or BANK that was underwriting approved it then it must be OK and if anything did happen they would be free from blame. NOT SO! If you are a mortgage broker BEWARE, you will be held accountable and responsible. Fraud and the complicity in fraud IS A CRIME punishable by serving time in prison. Realtors, the same goes for you. Ask yourselves, is that commission really worth several years in jail?

Let me add that this is not only being done by Realtors, Mortgage Loan Originators and Lenders, major national real estate developers are leading the charge. Once again it appears as if the little guy is to blame but once again it is the big guy that is responsible but passes the blame and punishment down hill. The big guys pay a fine when caught and once in a while lose their jobs and get a large going away gift.

The regulators need to start at the top and work their way down to solve fraud not the other way around.

In our book, Protect Yourself from Real Estate and Mortgage Fraud: Preserving the American Dream of Homeownership, Rachel Dollar and I point out a host of other types of real estate and mortgage fraud, including illegal flipping, double-sales scams, builder bailouts, contractor cons, chunking, Ponzi schemes, and foreclosure rescue scams. Remember that the best defense against scams and the scumbags who perpetrate it is education. Learn how to spot, stop, and post (report) real estate and mortgage fraud. It just may save your home, your neighborhood, and your nation.