Short Sale Fraud Plagues Housing Market

NEW YORK -- Just as the housing market began to collapse near the end of 2007, a real estate agent in Bridgeport, Conn., asked Regions Bank if it would accept a $102,375 bid on a home that was underwater on its mortgage. Under the impression that this was the best offer on the home, Regions agreed to the short sale and released the mortgage it owned on the home.

Later that same day, the new owner -- an investment group owned by another real estate agent -- resold the home to a buyer who had been lined up before the short sale transaction went through. The final sale price: $132,500, netting the seller a cool $30,000 -- a profit that should have gone to Regions.