Then they jack up the price of the house that the "mark" buys, 1) making even more money, 2) clearing through dead inventory and 3) celebrating that they found another sucker
The IRS caught on to this and is (hopefully) putting an end to it. But the damage was done, 580,000 people took the con, and now they're stuck with homes that are likely declining in value and in many cases ARM loans they can't pay.
Oh, boy, I can't wait for the housing bubble congressional hearings. Thanks PE for the link.
IRS: Charity lending is scam -- Down-payment plans called misleading
Calling them scams, the Internal Revenue Service plans to revoke the charitable status of down-payment assistance programs that have fueled the business of Dominion Homes and other builders.
"So-called charities that manipulate the system do more than mislead honest homebuyers and ultimately jack up the cost of the home," IRS Commissioner Mark W. Everson said in a statement. "They also damage the image of honest, legitimate charities."
Federal law prohibits home builders from helping customers directly with down payments. For years, however, builders have partnered with charities to funnel money to buyers. The IRS is examining 185 such charities, which have helped hundreds of thousands of people buy homes with government-backed mortgages.
Typically, a charity gives the customer a down payment, and the builder reimburses the charity plus a processing fee. The programs offer a similarly popular service for individual home sellers, usually through their real-estate agents.
The programs help buyers with the 3 percent down payment required for a government-insured Federal Housing Administration mortgage. Many of those buyers get in over their heads financially and later lose their houses, studies show.
Nearly a third of FHA loans nationally last year involved charitable down-payment assistance to the tune of hundreds of millions of dollars.
Without their charitable status, down-payment assistance programs can't do business with the FHA.
A Dispatch series, "Brokered Dreams," in September detailed the risks to home buyers and taxpayers of such down-payment assistance. The stories focused on the partnership between Dublin-based Dominion and the Nehemiah Corp. of America, a California charity that pioneered the business strategy.
Nehemiah, the largest program, received $143 million in down-payment money from sellers in 2004, according to the most recent IRS filings. Seller "donations" accounted for more than 99 percent of Nehemiah's revenue.
David Dillen, president of Colony Mortgage, partnered with Dominion on hundreds of loans involving down-payment assistance. But Dillen said HUD was long overdue in shutting down the gift programs.
"What the hell took them so long?" he said. Colony followed HUD's rules but didn't agree with them. "It was a big scam."
August 10, 2006
OK, here's the scam. Builders funnel "money" to "charities" who give it to "suckers" for downpayment to buy a house...
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They just had a conviction in Austin for something similar. The penalty? Probation. Everyone was just a victim (in the eyes of a judge) and were good people who made bad decisions. I was disgusted by the verdict. You take $40,000 knowing it is a scam and that is a bad decision? Because you do volunteer work or work with children you suddenly are a good person and shouldn't be punished? I guess white collar crime does pay (look at Milken, so what a few years in prison to keep his millions, good pay, where do I sign up?).
The corruption out there is astounding. Nothing will change and the taxpayer always gets the bill.
thanks again for raising the issue PE
Sh#t, they've been doing this for at least 5 years. The builders even tell the buyers where to go to down the street to get the down. Talk about pumping the housing bubble! Everyone is in on it!
And, just you wait, the first thing to go will be the 500 and 250K (no tax) when you sell a house.
Again, we'll all get it up the old pie hole! Just you wait!!!!!!
The more you look, the deeper the hole goes. This could be the straw that broke the monkey's uncle.
hey did any of you see this
The Saturday WSJ reports that "More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody's Economy.com, a research firm in West Chester, Pa.
http://tinyurl.com/ecpod
pretty crazy to say the least...I was digging a hole in the back yard for a concrete support for my new deck
(Bought with cash anonopusses Built by my own hand. I am a to cheap a Bastard to pay someone Labor plus It is a good excuse to drink a 12 pack and get a workout in at the sametime) after reading this I was thinking I should dig real deep for a Bunker and start hoarding can goods.
Gonna Get real Nasty in the next few Months and that aint no bullshit.
Interesting like there panicearly especially these quotes
When the servicer decides to manipulate the date the payment is received in order to artificially
create a late payment.
When the servicer applies part of the payment to something other than principal and interest and
creates a partial late payment or deficiency.
When the servicer decides to "force place" an insurance policy on the property by claiming the
homeowner has not provided proof of insurance.
When the servicer pays your property taxes late, then adds their late penalty to your account
without your knowledge.
Talk about bending over and grabbing your heals..at least talk dirty to me before the actual act begins.
"link"
and you find this surprising?
Do you Republican have enough brain cells to make the conection between Bush not letting Osama go and moving resources to invade Iraq for personal gain?
Iraq was not even a Muslim country with Sadam in charge and was 0 threat to the world...now it is a muslim American hating country.
If the billions given away to Bush's friends over the Iraqi war went into making the country safer there would no longer be any Osama.
Are you republicans able to make the connection between "terror threat in Britian" and "code red" and "up coming election in which Republicans are scared of losing congress due to Bush's complete failure at governance" ?
I predicted a "code red" prior the this election 1 year ago, it was easy.
Would not be suprised if someone uncovers a FBI connection and money trail to these guys in London...of course they will be label Anti-Americans.
Do you republicans not have enough brain cells to figure out that the CIA was behind the WTC attacks
WOW.
Over 500,000 homes, the tax payers got conned big time on this one and everyone pays through a distoreded housing market.
Realtors made out, as usual, mortgage brokers made out, and higher tax revenue too. All at the expense of the citizens.
This people will be homeless in a few years
Another company is Ameridream. I think they are under criminal investigation by several Attny Generals. The only problem is that the company liquidated into the winds, the brokers that got their big commissions have moved on to other Mortgage companies that are trying other scams. For example M Point Mortgage services has some Ameridream mort brokers.
The terms 'Republican' and 'Democrat' long ago ceased to have any relevance. With VERY few exceptions, both parties' politicians are cut from the same cloth as realtors. Blaming 'R's' or 'D's' brings nothing to an argument. One may as shout "Go Steelers!!!" or "Go Redskins!!!", etc...
I am a consultant who works with on employers and others on creating housing benefit programs for workers (I coined the phrase employer-assisted housing nearly 20 years ago and conducted much of the research that launched employer-assisted housing as a recognized affordable housing strategy). Recently I was contacted by one of these gift companies which wants to build relationships with employers. Having also been involved with predatory lending issues in my career I recognized this as a scam and declined to participate, but employers can be ripe for the picking on this one. They understand little enough about housing and can wind up in trouble. A strategy to alert employers is needed, perhaps as part of the national, Don't borrow trouble" campaign.
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This is the reason Colorado has so many foreclosures right now. I think there's a place for these programs on a very limited scale, but some of these builders built their marketing campaigns around "no downpayment programs."
The real loser here is the borrower since the builder, real estate agent, title company and mortgage broker got paid. The lender was insured, but inconvenienced. The borrower gets their credit ruined and is no longer eligible for FHA loans.
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