Bank of America short sales scam warning from FBI

PORT ST. LUCIE, Fla. - The FBI says criminals have been selling Bank of America short sales that the bank never approved.

“You have to be really careful. We live in the sunniest place in the country, but we also have the shadiest people," Jim DiPaola, host of "Talk Real Estate with Rob and Jim" on 94.3 FM said.

He explained how the scam works.

“They were telling buyers they had approved short sales through Bank of America, when Bank of America never approved the short sale. And the buyer went ahead and bought the house anyway," DiPaola said.

The FBI said the crooks asked the title company to wire the money to a fraudulent account. FBI agents arrested three California men who they think netted more than $10 million that way.

And while the money disappears, the buyer's debt does not.

“In reality the purchaser is now subject to that first lien holder, that mortgage, that outstanding mortgage that may be $2 or $300,000 against that property," Victoria Coyne with Trident Title said.

Companies that don't work directly with the banks, unlike hers, were trusting that the short sale approval letters were real.

“It’s easier to defraud the bank today than it was 10-15 years ago,” Coyne said.

Copycats could be out there. Bank of America issued new guidelines in-light of the scam, telling title companies to call an 800-number to verify the approval letter.

DiPaola said buyers who just purchased a Bank of America short sale should not be too concerned.

“The first thing that they should do is go back to their title company that closed the deal and ask them to call up Bank of America if they feel that they've been victimized."

NewsChannel 5 asked if title insurance would protect you in a case like this. Coyne said coverage is questionable because of the extreme circumstances surrounding this type of scam. While title insurance protects you against liens that pre-date the policy, there are exclusions.