Broker Sues Freddie For Blacklisting Him On Suspicion Of Improperly Counseling Customers On Short Sale 'Shuffles'; Feds Respond By Raiding His Real Estate Office

In Livonia, Michigan, the Observer & Eccentric reports:

• Former state Attorney General Mike Cox, who represents the owner of the Livonia-based realty raided Wednesday by the FBI, said he expects no charges will be filed against his client because he hasn't broken any laws.
  
  “I think it will turn into a whole bunch of nothing,” he said. “I haven't seen one thing that would lead to a charge.”
  
  Cox said the FBI raided William Elias's Livonia and Brighton offices because the Federal Home Loan Mortgage Corp. (Freddie Mac) told law enforcement officials he was committing fraud by hiding the fact some of his short-sale customers had bought second homes. Cox said Freddie Mac is going after Elias and his businesses, including Elias Realty, because he does more short sales than anyone else in Michigan.
  
  Cox said Thursday he had not seen a copy of the search warrant.
  
  Elias sued Freddie Mac in U.S. District Court Jan. 31, saying his businesses were unjustifiably blacklisted and have lost 500 clients and more than $2 million in revenue. Freddie Mac placed Elias on its exclusionary list in November, meaning it could not participate, either directly or indirectly, in any Freddie Mac transaction.
  
  In a letter Oct. 1 to Elias, Freddie Mac alleged Elias “instructed borrowers to purchase a new home prior to applying for short sale assistance on the Freddie Mac loan,” the lawsuit says, and the short sale packages submitted to the Freddie Mac servicers on behalf of the borrowers “failed to disclose the acquisition of the new home.” Freddie Mac also alleges the inability of the borrowers to repay the Freddie Mac loans was “not genuine” or “was created as a result of the purchase of the new homes made possible through Elias and his companies.”(1)
  
  Elias denies all the allegations.

***

• Cox said Elias never broke any Freddie Mac rules; he simply explained them to people.
  
  According to Freddie Mac, people generally qualify for a short sale by demonstrating one of four hardships: divorce, debt, disability or distant relocation. They also qualify if they haven't paid their mortgage for three months, Cox said. “He doesn't tell them what to do,” he said, adding that Freddie Mac guidelines encourage some homeowners to forego payment of their mortgage if they do not qualify by virtue of a death, divorce, disability or distant relocation.
  
  These same regulations do not prohibit potential short sale homeowners from purchasing a second home with lower payments before they stop paying on the first mortgage, Cox said.

For the story, see Cox doesn't expect charges against Elias Realty (Short-sale customers caught in quagmire).

See also Livingston Daily: FBI raid raises questions about short-sale deals.

(1) According to a Detroit Free Press story (see FBI raids William Elias' realty offices, Agents sought files on 23 properties):

• Elias, 38, was until this fall a familiar presence on local radio and television, where he advertised his real estate services with a showman's flair. He encouraged frustrated homeowners who were underwater on their mortgages to erase their debt by dialing 877-CALL-WILL.
  
  The ads went off the air soon after Elias received notice in October that the Federal Home Loan Mortgage Corp., known as Freddie Mac, would add his businesses to its "Exclusionary List" of agents and lenders with which it will not do business because of alleged unsavory practices.

An April, 2012 story attributed to reporter Greta Guest in the Detroit Free Press says this about Elias:

• And he’s advised homeowners who feel trapped in underwater mortgages to buy a new home before starting the short-sale process. It could be hard to get approved for a mortgage if the lender knows you are doing a short sale even if you haven’t missed payments.
  
  “Am I tricking the bank? Absolutely not. There are no laws against this, and the banks can’t turn down an applicant who qualifies for two mortgages just because they want to,” Elias said. “I hope I’m looked at as helping people.”