You've heard of "flipping" houses, well now there's "flopping." While the first was speculative, this one is outright fraud.
"Flipping" refers to when home values were rising so fast and the market was so hot that you could buy a house, slap on some new paint and fix up the yard and throw down some marble countertops and turn it around and sell it for a tidy profit.
Now that the bubble has burst and people are trying to offload all these houses, one of the ways they are doing it is in a "short sale" where the bank agrees to allow the house to be sold for less than the value of the mortgage. Doing so lets them avoid the costly foreclosure process and gets the bad loan off their books.
But what "floppers" are doing is pay a crooked appraiser to say that the house is worth even less than its real current market value. They then have a "straw purchaser" buy it, and then they turn around and sell it for what it's really worth.
The Federal Financial Crimes Enforcement Network (FinCEN) recently released a report indicating that mortgage fraud suspicious activity reports rose 7% in the first half of 2010, the terms "short sale" and "broker price opinion" showing up 827 times and 41 times, respectively.
THE TAKEAWAY: What this means for homeowners is that banks are making it harder to do short sales, preferring to instead go for foreclosure, even when it costs them more money. Several cases have come out where the bank has insisted that the short sale price was too low to allow the sale to go through, only to turn around and try sell the house at auction for less than what the short sale price was.
What you can do if your short sale is initially declined is try to convince the bank that the "auctionable cash-price," the price they can sell the house for at auction, is lower than what they think. Submit in one big packet at once any interior deficiencies, renovation costs, or engineering reports that you think will make the case. Include several different contractor estimates and bids and broker price opinions to help make your case.
For more information on preventing foreclosure, check out this Consumer Reports article.
Mortgage Fraud Suspicious Activity Reports Rise 7 Percent Increase in the First Half of 2010 [FINCEN.gov]Wary lenders denying short sales [Boston] (Thanks to chiieddy!)
SIGTARP Quarterly Report to Congress April 20, 2010 (PDF) [SIGTARP.gov]
Short Sale Denied; Advice to make Bank Reconsider? [ths.gardenweb]
It feels good to give to needy organizations, whether it's a homeless shelter or a firefighter's charity. But how would it feel to know that most of the money you donated went to the telemarketing company making the call?
Oregon Attorney General John Kroger released a list of what he calls the 20 Worst Charities, hoping that consumers would make sure to avoid scams and give money to those groups who actually put it to good use."In the middle of a recession, it is more important than ever that generous Oregonians make charitable contributions to organizations that help veterans and others who are in need," said Kroger.
"It is critical, however, that people donate wisely. Although many charities do great work, some are little more than scams with good-sounding names but that do little to actually help the people they claim to support."
Charity guidelines usually dictate that they spent at least 65% of the money they collect on their programs. But every charity on the list devotes less than 25% of what they get to the people or activity they're supposed to be collecting the money for.
Kroger pointed out that California-based organization Shiloh International Ministries -- which is supposed to use its money providing help to children, veterans and the homeless -- actually spends 96% of its donations on management and fundraising.
The California-based nonprofit spent an average of $1,023,215 per year.
Other charities Kroger highlighted include:
Association for Firefighters and Paramedics, based in California
Korean War Veterans National Museum & Library, based in Illinois
Foundation for American Veterans, based in Michigan
Big Hope, in South Carolina
Law Enforcement Education Program, in Michigan
National Vietnam Veterans Foundation, in Virginia
Dogs Against Drugs/Dogs Against Crime, in Indiana
Firefighters Charitable Foundation, in New York
Committee for Missing Children, in Georgia
The Wishing Well Foundation, in Louisiana
Keep these tips in mind when donating and check out the state's database for its take on specific charities. Check out the IRS's website to make sure it's tax deductible.
Don't give to unregistered charities
Do your research.
Resist impulse decisions to donate.
Do not donate cash.
If you don't remember a pledge, you probably didn't make one.
Be leery of sweepstakes for charity.
Contact the charity directly.
Don't give personal or financial information over the phone.
Reduce the number of unwanted solicitations by registering your number on the Do-Not-Call List.
Make sure your gift is tax-deductible.
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