Consumer complaint received 2024-10-27
Product: Mortgage — FHA mortgage
Issue: Closing on a mortgage — Delays with the closing process
Company: Meadowbrook Financial Mortgage Bankers Corp. (NY)

In XX/XX/year>, my client attempted to sell her home in XXXX, NY. However, during this process, we identified multiple instances of fraudulent misrepresentation on the mortgage application submitted by Meadowbrook Financial. Additionally, we discovered an inaccurate appraisal that inflated the propertys value by over {$75000.00}.

The seller and the buyer were once friends, leading the buyer to share his entire mortgage application with the sellera document he seems to have forgotten about. Currently, the buyer is claiming he was always a part-owner of the property, despite his signed FHA Identity of Interest form , where he explicitly stated there was no family or business relationship with the seller. A copy of this signed document is attached. This document also differs from his notarized sworn court document which state that the property was purchased as an investment ( see statement attached ). If this is the case, which is not, should have indicated that this was a business transaction, which would have not allowed him to take advantage of the 3.5 % down payment. This was all overseen by the mortgage broker.

Furthermore, the buyer falsely claimed on his mortgage application that he had lived in the property for eight years, despite the fact that my client did not own the home for that length of time. It's likely that the buyer lied about his residency to appear more stable to lenders, who often see longer occupancy as a sign of financial responsibility and lower lending risk. In reality, the property was tenant-occupied, which was one of the reasons the seller was unable to deliver the home.

Meadowbrook oversaw the entire application process. The application is also attached. 

The appraisal was completed by XXXX XXXX in XXXX, NY ( Meadowbrook Financial was also present ) and failed to meet the guidelines of HUD. Specifically, the report incorrectly lists the house as having two and a half bathrooms, which is entirely false. In reality, the .5 bathroom is only a small niche in the mudroom with two walls and a toilet. There are no other bathroom fixtures in that area, and without a sink, it can not be classified as a half bathroom. Additionally, the appraisal diagram inaccurately shows a garage with a " bedroom '' a few feet away. In reality, no such bedroom exists ; the space in question is a mudroom. Not only does this area fail to meet XXXX XXXX definition of a bedroom, but it also serves as the only access to the non-habitable garage which is actually depicted on the buyer 's appraisal report. According to XXXXXXXX XXXX guidelines, a bedroom can not act as a passageway to another space, such as a garage. As a result, the home was listed as a three-bedroom with an accessory unit, when in reality, it should have been classified as a two-bedroom home, if the additional section even qualified as an accessory apartment, which it does not. The so-called accessory apartment, located on the right side of the house, also fails to meet XXXXXXXX XXXX requirements for accessory apartments. The appraiser would have known this had he properly inspected the space, but he neither entered the area nor took any photos of it- Meadowbrook was also present during this inspection. The " kitchen '' shown in the diagram does not conform to XXXXXXXX XXXX definition of a kitchen for an accessory apartment. The appraisal report attributed {$30000.00} of value to a so-called " accessory apartment '' unit, which only added to the pattern of fraudulent assessments. This is wholly against HUDs stringent rules on appraisals which indicate inspectors must access ALL rooms in a dwelling. Amidst these inaccuracies, one truthful statement stood out : the appraisal report correctly classified the transaction as non-arms-length, acknowledging the personal ( but not familial ) relationship between the buyer and seller. This detail is crucial, as FHA guidelines explicitly prohibit a gift of equity in such situations. Gifts of equity can only come from family members, and yet, no one raised this issue. Despite this key restriction, Meadowbrook Financial, insisted on including the gift of equity in the contract. Their blatant disregard for FHA guidelines highlights the fraudulent nature of the entire transaction. Upon further inspection, the appraisal report raised more concerns. The appraiser included several misleading photos. One image, labeled as a bedroom, is actually a small sitting area open to the first floor like a balcony. The mudroom was mislabeled as an office in the report, yet on the diagram, it was depicted as the bedroom. These falsifications greatly inflated the home 's value, further undermining the integrity of the appraisal process. Since my client did not consent to signing the contract, the issue has escalated to litigation, costing her over {$40000.00} in legal fees and nearly {$100000.00} in urgent home safety renovationsissues that were deliberately omitted from the reports. For example, many outlets had live grounding wires ; without proper grounding, a lightning strike could have electrified the entire house, posing a deadly fire risk.

This mortgage fraud includes- Residence fraud Appraisal fraud Gift of Equity fraud This matter has now been reported to the FBI and the Office of the Inspector General and will soon be brought to the attention of the New York State Attorney General.