Straw purchase

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A straw purchase or nominee purchase is any purchase wherein an agent agrees to acquire a good or service for someone who is often unable or unwilling to purchase the good or service themselves, and the agent transfers the goods or services to that person after purchasing them. In general, straw purchases are legal except in cases where the ultimate receiver of goods or services uses those goods or services in the commission of a crime with the prior knowledge of the straw purchaser, or if the ultimate possessor is not legally able to purchase the goods or services.

Contents

In some jurisdictions, straw purchases are legal even if the end user is not legally able to purchase the good or service themselves. [1]

Examples of legal straw purchases would be purchasing groceries for senior citizens who are unable to go to supermarkets themselves because of poor health or financing an automobile for someone who cannot obtain a loan because of poor credit. In some cases, the agent in the straw purchase may receive money or recompense from the ultimate possessor. Obtaining loans through a straw buyer is legal except when the agent and ultimate user of the funds defraud the lender or foreseeable ultimate lender, such as by signing false mortgage documents designed to be mingled with other mortgages and securitized, or when the loan terms expressly prohibit use of an agent to obtain funds.

If straw purchases are legal despite the good or service purchased not being legal for the end user to receive, the end user may become liable for illegally possessing or receiving the good or service, but the straw buyer who was legally able to make the purchase is generally not held liable for their actions.

Illegal uses

Firearms

In the United States, a straw purchaser of a firearm at a federally licensed firearm dealership who lies about the identity of the ultimate possessor of the gun can be charged with making false statements on a federal Firearms Transaction Record, which is a felony. Note that in this case, purchasing the item for another person is ipso facto illegal, regardless of that person's status as a legal possessor. If a firearm is purchased as a gift, the transaction is not a straw purchase, and the person buying the gift is considered the end user. It is illegal for any person not in possession of a Federal Firearms License to purchase a firearm with the intention of resale. Private purchases in lawful sales made outside of federally regulated dealerships are not subject to such rules and are federally legal unless the gun is used in a crime with the prior knowledge of the straw purchaser. [2]

Alcohol

Straw purchases of alcohol are illegal in most jurisdictions when a person under the legal drinking age requests that a person above the legal age purchase alcohol for the underage person, and the straw purchaser knows or might reasonably assume based on the circumstances that the person is under the legal age.

In England and Wales, buying alcohol on behalf of a person under 18 is a summary offence under section 149 of the Licensing Act 2003, punishable by an unlimited fine (level 5 on the standard scale). There is an exception for beer, wine or cider served to a 16 or 17 year old with a meal at a table. [3]

Tobacco and nicotine products

As of October 2015, it is an offence to buy tobacco, cigarette papers (for the purpose of smoking tobacco) or e-cigarettes on behalf of individuals under 18 years of age in England and Wales. [4] It was already an offence in Scotland.

Mortgage loans

The use of a straw person to obtain auto or mortgage loan funds is illegal if and when the funds are misused intentionally. In Canada, the Bank of Montreal sued hundreds of people, including Federal Conservative MP Devinder Shory, for allegedly being involved in a mortgage fraud in which the bank lost $30 million. [5] The bank alleged that straw buyers, in exchange for a cash payment, applied for mortgage loans in the Calgary area on behalf of other parties and knew before submitting the applications that the loans would not be paid. The lawsuits were settled out of court. [6]

In United States v. Quintero-Lopez, two men were charged with locating eight straw purchasers for homes and helping the straw purchasers falsify pay history documents in order to obtain $8.3 million in mortgage loans. The government alleged these loan purchases were illegal because the straw purchasers inflated their incomes as part of an attempt to defraud the lenders. In 2011, one of the two straw purchaser recruiters was sentenced to six years in prison and the other was sentenced to one year of probation. [7] Straw or nominee purchases of mortgage loans are legal when intent to defraud is not present.

See also

Related Research Articles

In law, conveyancing is the transfer of legal title of real property from one person to another, or the granting of an encumbrance such as a mortgage or a lien. A typical conveyancing transaction has two major phases: the exchange of contracts and completion.

An escrow is a contractual arrangement in which a third party receives and disburses money or property for the primary transacting parties, with the disbursement dependent on conditions agreed to by the transacting parties. Examples include an account established by a broker for holding funds on behalf of the broker's principal or some other person until the consummation or termination of a transaction; or, a trust account held in the borrower's name to pay obligations such as property taxes and insurance premiums. The word derives from the Old French word escroue, meaning a scrap of paper or a scroll of parchment; this indicated the deed that a third party held until a transaction was completed.

This aims to be a complete list of the articles on real estate.

In criminal law, property is obtained by false pretenses when the acquisition results from the intentional misrepresentation of a past or existing fact.

Bank fraud is the use of potentially illegal means to obtain money, assets, or other property owned or held by a financial institution, or to obtain money from depositors by fraudulently posing as a bank or other financial institution. In many instances, bank fraud is a criminal offence.

A repurchase agreement, also known as a repo, RP, or sale and repurchase agreement, is a form of short-term borrowing, mainly in government securities. The dealer sells the underlying security to investors and, by agreement between the two parties, buys them back shortly afterwards, usually the following day, at a slightly higher price.

Title insurance is a form of indemnity insurance, predominantly found in the United States and Canada, that insures against financial loss from defects in title to real property and from the invalidity or unenforceability of mortgage loans. Unlike some land registration systems in countries outside the United States, US states' recorders of deeds generally do not guarantee indefeasible title to those recorded titles. Title insurance will defend against a lawsuit attacking the title or reimburse the insured for the actual monetary loss incurred up to the dollar amount of insurance provided by the policy.

<span class="mw-page-title-main">Gun shows in the United States</span> Display and sales event for guns and related paraphernalia in the USA

In the United States, a gun show is an event where promoters generally rent large public venues and then rent tables for display areas for dealers of guns and related items, and charge admission for buyers. The majority of guns for sale at gun shows are modern sporting firearms. Approximately 5,000 gun shows occur annually in the United States.

A bill of sale is a document that transfers ownership of goods from one person to another. It is used in situations where the former owner transfers possession of the goods to a new owner. Bills of sale may be used in a wide variety of transactions: to sell goods, exchange, give, or mortgage objects. They can be used only to transfer ownership of goods that people already own or to transfer ownership of moveable tangible goods and only by individuals and unincorporated businesses.

A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses. Traditionally, banks and other lending institutions have sold their own products. As markets for mortgages have become more competitive, however, the role of the mortgage broker has become more popular. In many developed mortgage markets today,, mortgage brokers are the largest sellers of mortgage products for lenders. Mortgage brokers exist to find a bank or a direct lender that will be willing to make a specific loan an individual is seeking. Mortgage brokers in Canada are paid by the lender and do not charge fees for good credit applications. In the US, many mortgage brokers are regulated by their state and by the CFPB to assure compliance with banking and finance laws in the jurisdiction of the consumer. The extent of the regulation depends on the jurisdiction.

<span class="mw-page-title-main">Second mortgage</span> Additional loan

Second mortgages, commonly referred to as junior liens, are loans secured by a property in addition to the primary mortgage. Depending on the time at which the second mortgage is originated, the loan can be structured as either a standalone second mortgage or piggyback second mortgage. Whilst a standalone second mortgage is opened subsequent to the primary loan, those with a piggyback loan structure are originated simultaneously with the primary mortgage. With regard to the method in which funds are withdrawn, second mortgages can be arranged as home equity loans or home equity lines of credit. Home equity loans are granted for the full amount at the time of loan origination in contrast to home equity lines of credit which permit the homeowner access to a predetermined amount which is repaid during the repayment period.

<span class="mw-page-title-main">Credit</span> Financial term for the trust between parties in transactions with a deferred payment

Credit is the trust which allows one party to provide money or resources to another party wherein the second party does not reimburse the first party immediately, but promises either to repay or return those resources at a later date. The resources provided by the first party can be either property, fulfillment of promises, or performances. In other words, credit is a method of making reciprocity formal, legally enforceable, and extensible to a large group of unrelated people.

Discount points, also called mortgage points or simply points, are a form of pre-paid interest available in the United States when arranging a mortgage. One point equals one percent of the loan amount. By charging a borrower points, a lender effectively increases the yield on the loan above the amount of the stated interest rate. Borrowers can offer to pay a lender points as a method to reduce the interest rate on the loan, thus obtaining a lower monthly payment in exchange for this up-front payment. For each point purchased, the loan rate is typically reduced by anywhere from 1/8% (0.125%) to 1/4% (0.25%).

<span class="mw-page-title-main">Cigarette machine</span> Vending machine that sells cigarettes

A cigarette machine is a vending machine that dispenses packs of cigarettes in exchange for payment. Many modern cigarette machines require customers to swipe an identification card to prevent persons under the legal smoking age from purchasing tobacco. Because of their potential for misuse by underage persons, many jurisdictions restrict where cigarette machines can be located or prohibit them altogether.

Mortgage fraud refers to an intentional misstatement, misrepresentation, or omission of information relied upon by an underwriter or lender to fund, purchase, or insure a loan secured by real property.

Phillip E. Hill Sr. was the ringleader of the largest mortgage fraud scheme ever prosecuted in the State of Georgia.

The Home Equity Theft Prevention Act is a New York State law passed on July 26, 2006, to provide homeowners of residential property with information and disclosures in order to make informed decisions when approached by persons seeking a sale or transfer of the homeowner's property, particularly when homeowners are in default on their mortgage payments or the property is in foreclosure.

<span class="mw-page-title-main">ATF gunwalking scandal</span> US operation to capture weapons smugglers

Gunwalking, or "letting guns walk", was a tactic used by the Arizona U.S. Attorney's Office and the Arizona Field Office of the United States Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), which ran a series of sting operations between 2006 and 2011 in the Tucson and Phoenix area where the ATF "purposely allowed licensed firearms dealers to sell weapons to illegal straw buyers, hoping to track the guns to Mexican drug cartel leaders and arrest them" - however as of October 2011, none of the targeted high-level cartel figures had been arrested. These operations were done under the umbrella of Project Gunrunner, a project intended to stem the flow of firearms into Mexico by interdicting straw purchasers and gun traffickers within the United States. The Jacob Chambers Case began in October 2009 and eventually became known in February 2010 as Operation Fast and Furious after agents discovered Chambers and the other suspects under investigation belonged to a car club.

Abramski v. United States, 573 U.S. 169 (2014), was a United States Supreme Court case in which the Court found that making arrangements for a straw purchase of a gun is in violation of the Gun Control Act of 1968, and is different from re-selling or gifting a previously purchased gun. In the Abramski case, a former police officer from Virginia took advantage of a local discount to buy a gun for his uncle and later transferred it to Pennsylvania—the uncle's residence—using the appropriate federal procedure. During the purchase, Abramski falsely declared that he was purchasing the gun for himself.

References

  1. Merrick, Jane (November 30, 2013). "Labour would make it illegal to buy cigarettes for children" . The Independent . London: Independent Print Limited. Archived from the original on 2022-05-25. Retrieved 22 July 2016.
  2. "ATF P 5300.4 – Federal Firearms Regulations Reference Guide 2005 General Information discusses "straw purchase" on p. 165 (application/pdf Object)" (PDF). www.atf.gov. Retrieved 2010-05-16.
  3. "Licensing Act 2003: Section 149", legislation.gov.uk , The National Archives, 2003 c. 17 (s. 149)
  4. The Children and Families Act 2014 ss. 91 and 92 came into force on 1 October 2015. Regulations coming into force at the same time added e-cigarettes, which had become popular since the Act's enactment.
  5. "Calgary – MP Shory accused in giant mortgage fraud". CBC News. 2010-05-05. Archived from the original on May 26, 2022. Retrieved 2010-05-16.
  6. "'Straw buyer' seduced into mortgage scheme". CBC News. 2010-05-06. Archived from the original on February 13, 2023. Retrieved 2010-05-16.
  7. Bell, Alexis (2010). Mortgage Fraud & the Illegal Property Flipping Scheme: A Case Study of United States v. Quintero-Lopez. Archived from the original on 2012-03-28.