From the beginning of this year, the Federal Housing Finance Agency (FHFA) has been warning developers of a looming housing crisis.
They have been inundated with requests to purchase their properties and the FHFA has warned that a lot of those requests may be fraudulent.
The agency has warned the public that fraudulent transactions could result in the loss of tens of millions of dollars in the next year, and that the FHA is prepared to take action against anyone who uses fraudulent transactions to obtain financing for new construction.
As the New York Times reports, the FHCFA has issued a statement calling for developers to take extra steps to protect themselves from fraudulent transactions.
“The FHSA urges developers to implement the following steps: Make sure to maintain the proper documentation for the financing request and provide the appropriate documentation for any changes made to the application or any subsequent approvals.
Make sure that the applicant is aware of the required documentation before submitting the request and that any changes to the request are communicated promptly to the applicant and the applicant’s designated representative.
Do not engage in any activity that will create a false positive or false negative statement on your application.
Make a record of any fraudulent transactions that you have engaged in with FHA and the relevant financial institution.”
In fact, the new regulation also provides for civil penalties of up to $10,000 for anyone who violates the law, and it’s not just the FHEA that is looking to get developers to get things right.
The New York State Department of Financial Services (DFS) is also cracking down on this type of fraud.
“It’s important that developers understand the risks of doing business with fraudulent lenders, and what actions they should take to protect their customers and property,” DFS director David Zappala told the Times.
“We need to protect our homeownership rate, but it also requires that developers have a better understanding of the potential pitfalls that can occur.”
To make sure developers are aware of this new rule, the NYS Department of Consumer Affairs has announced that they are requiring all new construction loan applicants to provide the FHBFA with an “adequate documentation of the applicant.”
The DFS is also issuing new guidelines that will be updated to incorporate this new regulation.
The new regulations are also being applied to other types of loans.
The FHAA has also been requiring new construction borrowers to provide documentation that shows the loan was originated by a non-Federal government agency.
According to the NY Times, the guidelines require that applicants be “sufficiently specific” with the information required to demonstrate that the loan originator was an “approved federal lender.”
For more information on the new rules, read the NYFHA’s full statement on this new FHHA regulation here.
[Image credit: Flickr/Jens Zielin]