What are the ed flags of cash-out purchase fraud?
Although challenging to detect, there are a few red flags to look for when reviewing mortgage files: • The home may have been on the market for an extended period of time • The sales contract may have been modified or may include an addendum regarding the payment to the borrower • The appraisal may include red flags symptomatic of inflated value • Many of the same red flags that accompany a traditional flip also apply to cash-out purchase fraud – straw buyer, false source of funds and false occupancy • The preliminary HUD-1 Form may already indicate a portion of the net proceeds going back to the borrower When any of these red flags surface, it is important to review the file more closely. • Ensure that the borrower truly has the represented funds to contribute at closing; borrowers involved in flipping typically do not • Take advantage of on-line real estate listing tools or contact the listing agent directly to verify the listing history on the property. Instances where the sales pri
