Use Of Builder Bailout Scams To Unload Unsold Inventory Become More Discreet

Buried in an article in the San Francisco Chronicle is a description of how some builders, looking to dump accumulated inventory that they are having trouble peddling, are using discreet methods to accomplish that end.

• [B]uilders used to give away microwaves. Now, says Jenny Brawley, fraud investigations manager at Freddie Mac, they give away cars, swimming pools, two years' worth of homeowner association dues, four years of mortgage payments, even five years of guaranteed rental income.

• These incentives not only are built into the inflated purchase price, they are not disclosed to the loan officer or the appraiser. "In fact," says Brawley, "there is an organized effort to conceal them" from lenders, who end up providing loans for more than the property is worth. The fraud specialist also is seeing a lot more involvement in these types of schemes from real estate agents. "They're the ones shopping these loans to lenders," she said.

For the story, which describes other general, non-builder related, real estate frauds, see Mortgage fraud burgeoning with new twists.