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Losses for “suspicious” transactions on short sales are up 20% from 2010. Suspiciously fraudulent short sales are where a lender may have suffered additional losses due to the short sale transaction quickly being followed by a resale for a higher price. Analysts from CoreLogic found that one in every 52 short sales in 2010 were “suspicious.” These transactions were responsible for $310 million in losses in 2010. CoreLogic believes that by the end of 2011, U.S. banks, as lenders, could face losses of $375 million because of short sales.

States such as California, Florida, Arizona, and Colorado are leading the way with these same day re-sales. On average the resales are $50,000 greater than the lender agreed upon short sale price. The study also pointed out the fact that investors in limited liability companies are the buyers in 2% of all short sale transactions, but in 28% of the suspicious cases, which has been suspected for some time. Craig Focardi, senior research director at The Tower Group said, “Identifying risk and monitoring distressed asset sale trends is absolutely essential for lenders to preempt potential losses.” The study examined more than 450,000 single family home transactions that were completed as short sales in the past three years.


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