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Banks Get a Pass for Fraud, Investors Don’t

Published on Thursday - December 20, 2012

Shocking revelations about one bank’s recent activities and the free pass they were given by law enforcement confirms the dangerous precedent being set which encourages breaking the rules.

This year real estate investing pros have seen the massive mortgage settlement enacted, essentially giving 5 of the nation’s largest mortgage lenders a free pass for horrendous amounts of widespread fraud.

Now new investigations have unveiled blatant disregards for the law at HSBC bank. HSBC, one of the world’s largest banks has been found to have been laundering money for terror organizations and drug cartels among other things. The irony is that despite officials and law enforcement being armed with all the evidence they needed to prosecute they settled for a measly new settlement, because the bank is considered “too big to fail”.

This is setting a dangerous precedent, suggesting that it’s OK to commit fraud or break the world providing you can buy your way out of trouble. However, this is a foolish mindset for real estate investing professionals to allow to corrupt their businesses.

Besides just being wrong, dozens of mortgage brokers, title reps, Realtors and real estate investors are still going to jail for real estate and fraud, and for very lengthy terms. Aside from the ethics issue, most real estate investors don’t have billions to throw away on buying themselves out.

Bad choices notoriously always catch up with investors eventually and no short cut is ultimately worth the penalty. It is far better to stay in business and still be standing when your competitors fall prey to their attempts to cheat the system than to lose everything.

Unfortunately this can be more challenging than many new real estate investors realize. Just as banks have become to insert new deed restrictions into their short sales preventing properties from being resold within specific periods of time or restricting spreads on flipping houses, there are many constant changes which can trap investors.

This makes it critical for those in real estate investing to not only begin with a good real estate education but to stay wired into to new trends and regulatory changes through coaching and continuing education.

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