Banks Keep an Eye Out for Short-Sales Fraud
Short-sale fraud totals $310 million annually and the average amount of fraud is $41,000 per transaction, according to real estate research firm CoreLogic’s 2010 short-sale research study.
“The best way to mitigate fraud risk and unnecessary loss is through a collaborative effort where lenders collectively share pre-closing and post-closing information,” says Craig Forcardi, senior research director, consumer lending at The Tower Group.
CoreLogic concluded:
* The number of short sales in the market has more than tripled since 2008, with the estimated annual volume at 400,000.
* Over half (55.8 percent) of all short sales occur in just four states (California, Florida, Texas, and Arizona).
* Approximately 4 percent of short sales have a subsequent resale within 18 months.
* Investor-driven short sales are not inherently bad. Investors provide the industry with necessary liquidity.
* Short sale transactions may be deemed risky to the lender when either the second sale amount is vastly higher than the short sale amount, and/or the two sale transactions are executed within a very short window of time.
* Approximately one in every 53 (1.9 percent) short-sale transactions was part of an egregious flip and therefore deemed risky.
Source: CoreLogic (08/10/10)
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