Anonymous wrote:This is the very reason interest rates are higher if you plan to rent the house.

If the renter suddenly stops paying (and hopefully moves out), you sister may not be able to afford the extra mortgage payment and she goes into default and the bank has to foreclose.

Lenders need the extra mortgage profit to cover the higher chance that the landlord defaults.

Yes this is the primary reason that mortgage fraud hurts everyone.
But also it is true that if a bank extends loans out to people who lie to them - then there is less $ to extend loans to others who may not look so great on paper as well.


While I can see why OP’s sister had the innate desire to help someone she cared about, putting herself out there where she is intentionally breaking the law is insane.
If the friend had persevered she could have found a place on her own.

This is the very reason interest rates are higher if you plan to rent the house.

If the renter suddenly stops paying (and hopefully moves out), you sister may not be able to afford the extra mortgage payment and she goes into default and the bank has to foreclose.

Lenders need the extra mortgage profit to cover the higher chance that the landlord defaults.

Anonymous wrote:Oh, and 6 months of paying the mortgage herself and living there temporarily is going to be a LOT cheaper than a defense attorney for mortgage fraud. Think hundreds of thousands in order to try and stay out of jail. Then add the huge fine. And the mortgage call back.

It's all going to add up to way more than the house probably cost. Tell her to move in this week!

I personally think if someone notifies her bank, then she will likely end up being prosecuted and have the book thrown at her.
She could very well end up in the slammer since banks do not suffer fools very easy when it comes to mortgage fraud.
It affects all of us when someone breaks the law.
Because many families who are truthful and want to have the American Dream get denied while people like your sister get their loans approved then turn around and cheat the system.
There is a special place in hell for those that intentionally lie……

If she gets charged with fraud, it will probably be in her favor that no lease exists. So no lease wasn't a "mistake", it was an unintended fortunate choice.

Anonymous wrote:

Anonymous wrote:What does the lease say? If you sister had no lease that was her mistake.

OP Here:
No lease - just verbal since they were good friends.

Big mistake.

Second big mistake.


Bought the house.
No lease.

Why did your sister's husband agree to this as well?

Oh, and 6 months of paying the mortgage herself and living there temporarily is going to be a LOT cheaper than a defense attorney for mortgage fraud. Think hundreds of thousands in order to try and stay out of jail. Then add the huge fine. And the mortgage call back.

It's all going to add up to way more than the house probably cost. Tell her to move in this week!

Your sister needs to suck it up as a lesson learned and pay the next 6 months out of her savings, or get a second job. And hope like crazy that she doesn't get turned in for mortgage fraud. I would be so nervous that I would move into the house for 6 months.

And she shouldn't have any more conversations with her friend. The friend already sounds saucy about the whole thing and how your sister was just using her to get a free house, etc. The friend could easily get her in trouble, so she needs to either stop communication with the friend, or limit it to congrats on the new job, how do you like the area, blah, blah, nice-y nice stuff.

The family needs to stop talking about it too. What's done is done, how many weeks do they need to keep talking bad about the friend? Someone in their orbit is going to overhear this, who may not like what your sister did, and secretly tell on her.

Your sister could end up in jail and have the mortgage called in. She'd better get her bags packed and move into that house this week.

Anonymous wrote:This is the part of threads like these where the OP stops responding because they realize it’s much worse than they thought (mortgage fraud).

OP the only good option is for you to stay away from this topic and not get involved in your sister’s irresponsible and illegal decision. Don’t even discuss it with her.

OP Here:
Yes I did not realize just how bad this was on my sister’s side.
Because everyone in my family is blaming her good friend saying this friend ditched her and ran, leaving my sister holding the bag.

Anonymous wrote:

Anonymous wrote:If it was a successful daycare, your sister should sale it as a business with real estate
Talk to business broker about it.

A home daycare with zero staff is not a business that is sellable; it’s not worth anything more than the value of a room of used kids furniture.

Zero staff and no enrolled children. That is not an ongoing business generating income

This is the part of threads like these where the OP stops responding because they realize it’s much worse than they thought (mortgage fraud).

OP the only good option is for you to stay away from this topic and not get involved in your sister’s irresponsible and illegal decision. Don’t even discuss it with her.

Anonymous wrote:How was the friend able to establish an in-home daycare in a residence that she wasn't legal to live in the first place?
I'm guessing the daycare want bonded, o sure, or licensed?

Your sister is playing with fire in so many ways. At least now, the illegal occupancy and her illegal business are no longer. Your sister should feel relieved and not angry

+1
The sister is lucky that no incidents happened at the daycare.

Anonymous wrote:If it was a successful daycare, your sister should sale it as a business with real estate
Talk to business broker about it.

A home daycare with zero staff is not a business that is sellable; it’s not worth anything more than the value of a room of used kids furniture.

Anonymous wrote:Why didn't your sister buy the 2nd house and tell the mortgage company it would be a rental/investment property?? At least it would be clean and legal.
Sure, the loan may be at a slightly higher rate, but she could roll-over the higher monthly payment to her friend when said friend goes to pay her rental fee.

I am guessing because the Sister was trying to commit fraud to the bank, by receiving a lower mortgage rate.

She was probably banking (no pun intended) on the fact that her friend would be so grateful for being able to rent a home to do daycare that she would feel indebted to the Sister forever and remain in the house for EVER!
Then the Sister would ultimately have the best of both worlds: a free house since the friend would be paying the mortgage from the jump, ETC.
Meanwhile the friend would be conveniently paying her mortgage since day one.

This was really not a true favor extended to a friend in need.
It was actually a scam to get a free house.

If it was a successful daycare, your sister should sale it as a business with real estate
Talk to business broker about it.

Your friend needs to move into this house and rent out her current home

Would that work?