I do not see how the transaction would have made it through underwriting.

You ask this question when the television news shows document New Century loans with blank income statements and no assets?

Okay well why wouldn’t the buyer simply buy the home for 500k at 100% financing? Why would the buyer incur a higher property tax assessment, why would the seller possibily incur a higher cap gains tax (if it was an investment property)?

Fraud prereq. You have a home that won’t sell at $500,000. Probably won’t sell until $470,000 or less with a qualified buyer.

Fraud 101. The buyer wants house and boy would a new $30,000 toy, like a new truck be nice. With his cruddy credit, when’s he ever going to a loan for a new truck?

Fraud 102. The seller has a home he can’t unload for the last 180 days, there are other similar houses around that can’t get sold and they want the same or even less, along comes buyerman who will give me the whole amount…

Fraud 103. With a $500,000 capital gains tax freebie for living in it, as long as seller man doesn’t trip that, he and his wife are fat dumb and happy. As for the buyer, $30,000 now for $300/yr later. Psst, I doubt he even thinks about the tax bill anyway.

Fraud 104. Every is on the take. Seller makes $30,000 more than he would and doesn’t have to wait, buyer man gets $30,000 for his new toy, and Agent man gets the sale that wouldn’t occur and gets $32,000 commission to carry back to his brokerage, maybe more if the co-op was fattened to keep them happy.