Sometimes timing is everything
 

I heard some news while talking with a friend last night who went to another mutual friend's house for their New Year's party... We will call this Mutual Friend "T". T has always been a salesman life of the party type. He was great in High School because he always met girls and through his coat tails many of our group of friends got with their friends. When he left High School He started his own Loan Mortgaging company (1996 after he had worked for a year at some other loan mortgage company). Anyway, He started to buy properties from distressed owners (pre-foreclosures) at discounted prices and then sell them to people with Bad Credit where he held the contract. Basically, it would work like this

House is worth 150k and is going to be foreclosed on.

T buys the house for 120k from the bank or owner. He then takes out a loan for 150k at 5% (Made 30k in 10 minutes)

T then sells the house to person with bad credit at 10% interest for 150k. He's now made 30k on the house and is making 5% interest until the owners either refinance, sell or find themselves in the foreclosure state. They refinance with a bank it doesnt matter to him as he made 30k on the deal. They Sell he still made 30k. They foreclose he might be out of payments for 6 months but the price of the home just went up and he makes a little bit more profit.

Now I know he has done well over the past 11 years but I didnt know how well. I remember talking with Two Utes in 97 about T and Two Utes said "If he can hold on for 10 years he is going to be extremely wealthy" and boy was that a prophetic statement.

Apparently He is building two homes in Bear Lake that will be 8700 square feet . Underneath the garage will be a play room with 16 foot ceilings and a bball court, in ground trampoline, putting green and swing set like you would buy at costco. Also, word is that he and his wife just bought 800k worth of Jewerly.

I tell you he got in the real estate game right when it was getting hot and made a bunch of money. Only did two semester in college but is making tons of money

I could be wrong but I think the "made 30K" part of this is mortgage fraud. Buyer can't take money away from closing.

He bought the House at 120k. He then refinanced it at 150k. No different than you or me taking out a home equity loan.

Okay you meed it sound like the mortgage for the purchase was for $150K. And what about seasoning? It would have taken 3-6 months before he could refinance.

Then you're saying the true value of the home is $150k and he stole $30k from the seller because the seller was desperate. That's dispicable, but if he tithed $3k of course its OK.

He paid tithing after tax, so it was well under$3k, which is ok.

Plenty of no seasoning programs out there. You can refi 1 day after a purchase in a lot of cases.

What he did was perfectly legal, some would say its unethical but these people are losing their houses regardless or would not be able to purchase a house in any other manner due to bad credit I think he is doing a nice service.

I think it's fine as long as it was truly a purchase with a refi later (even one day later). But the buyer getting money at closing is defined as mortgage fraud is it not?

Depends. Sometimes they allow seller concessions, In some cases the Lender can cut the buyer a check for certain things. But you can not take out equity on a purchase, I think thats what you were saying. So yes that is not allowed.