Remember that St. Louis coach who served as the straw buyer the other day (yet wasn't called out as a fraudster by the St. Louis Post-Dispatch)? Here's a good recap of the scam and an article about mortgage fraud craziness in Houston.
If the mortgage brokers are getting paid and the loans are sold off to China and hedge funds, hey, who gives a rats ass about out of control fraud? Party on!
THE STRAW BUYER SCAM
Mortgage frauds that prey on buyers with high credit scores tend to work like this:
1. A scam artist finds a buyer with a high credit score.
2. The scam artist gets a fraudulent appraisal that inflates the property's true value.
3. The buyer's high score and name are used to trick a bank into making a type of loan that requires little supporting financial information. The appraisal is used to get a bigger loan than the house is worth.
4. The seller is paid for the home.
5. Usually with the help of the seller, a loan officer or mortgage broker, the scam artist walks away with the difference between the loan amount and the price paid for the home by representing himself as a consultant, home remodeler or other service provider. Money is paid at closing directly to him or through companies controlled by him.
6. The buyer is stuck with a mortgage higher than the home's value.
Investigators predict more frauds will surface if the economy cools and interest rates rise, because it would be more difficult to turn homes over.
Many scams don't surface because mortgage companies are sometimes reluctant to report fraud. Often it amounts to indicting themselves if they turn in employees who commit fraud under their watch, said David Zugheri, a Houston mortgage broker. Many also fear being hit with defamation lawsuits if they report the activity.
"The industry is turning a blind eye to fraud," said Zugheri, whose own company was sued for defamation by a former employee fired for suspicious activity. "The industry is completely inside-out right now."
January 07, 2007
All around the country today, massive mortgage fraud is being committed. Anyone care?
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http://tinyurl.com/yj2dnq
A site to keep your eyes on our great contraction of credit.
Anyway Kiss Another One Goodbye
Secured Funding "The Home Equity Funding Specialist" Closes Shop
Dear Valued Customers,
Based upon market conditions and limited product availability, we are ceasing wholesale operations. We have stopped accepting new applications, and will have until the 12th of January to fund out the pipeline. We appreciate your patience as we undergo this transition.
Thank you for your support
Transition?
Transition to what?
Oblivion?
Mortgage Meltdown!
During the S&L fiasco, organized crime walked away with about 30% of the bailout money. Are we so naive to think they can't do even better in this go-round? The setting is perfect for mobbed-up types - little or no regulation, front companies and interstate money transfers that hide the true players, and greedy "honest" people all too happy to turn a blind eye.
With our governments fraud, i hardly notice anything else going on!
6. The buyer is stuck with a mortgage higher than the home's value.
I expect to be paid cash, six figures at closing, for my serices. I am not stuck with the house either, as I have no intention of making payments. People like the stockholders of Countrywide deserve the screwing, IMO.
borkfatty-
That story was on my blog 4 days ago. I guess I need to advertise more...
http://bakersfieldbubble.blogspot.com/2007/01/another-one-goes-down.html
Fannie Mae and Freddie Mac will be left holding the empty bag and the middle-class taxpayer will get stuck with the bill. We will then stiff the Chinese and Arabs and our dollar will go down the toilet.
go down the toilet?, gone!
LOW-DOC LENDERS BEWARE!
by Joe Average
aka Dr. William R. Swagell
January 7, 2007
“A growing body of case law says it’s the lenders who
should look out when low-doc loans go wrong.”
- Tina Perinotto, 20 December 2006, Australian Financial Review.
Court Ruling Alarms Low-Doc Lenders.
A recent ruling by an Australian court has sent shockwaves through the ranks of providers of low-doc and no-doc loans to sub-prime borrowers.
The court ruled in the “Khoshaba versus Perpetual Trustees Case” that the agent who wrote the loan had acted illegally because he had failed to establish that the borrower in fact had the capacity to repay the loan and would not default.
http://tinyurl.com/yfmhja
or
http://www.financialsense.com/fsu/editorials/swagell/2007/0107.html
The Real Estate Depression of 2007. [link].
"Investigators predict more frauds will surface if the economy cools and interest rates rise, because it would be more difficult to turn homes over."
As long as the buyer gets a "fair price," that's all that matters. If the buyer suspects that the price is too high, he/she shouldn't be buying!
Honestly, since I know that low-wage mexican labor is used and the profit margin is 60%, in some cases, I don't buy. Personally, I think that all realtors should present the profit margin to the buyer....
"Many also fear being hit with defamation lawsuits if they report the activity."
Actually, if "everyone is doing," but you take the fall, then maybe it is defamation since you were simply following industry/standard practices!
Great Post Buzz.
Great Post, Buzz.
I've been unloading my rental homes near Seattle, inflating the prices of home and kicking the money back to the buyer is VERY common now. I have no problem with it personally, as long as the buyer buys, makes his payment to the bank, so what? What's the difference between that and the prices going up 20% on their own last year? I'm happy dumping the property and the new "investors" have a home with no skin in the game, we both win. What could go wrong ;-)
So THIS is how you get a Seattle home to go from 200K to 1.3 million in 8 years!
Knew it couldn't be the fundamentals!
Don't you know that wages in Seattle have gone up 600% the past 10 years?
"Personally, I think that all realtors should present the profit margin to the buyer...."
I never buy a house without knowing. The real estate agent can pull a "sales history" to show all previous sales, including concessions. Sometimes this data is not on the MLS, so review the Preliminary Title report to find out the amount of existing liens. If there are no liens, you know exactly where you stand.
You can't do this with new houses though. Any real estate agent worth anything will provide the sales history for you. If not, find a new agent.
Utah Mortgages
Check out this article:
http://www.kansascity.com/mld/kansascity/news/16387313.htm
TWO Kansas City councilwomen, one of whom will be running for mayor, are being charged with mortgage fraud in different cases.
The one I have linked is the more interesting one. 11 people are charged so far, including a real estate agent, a mortgage broker, a CPA, an appraiser, and a straw buyer.
All this and the market has not gotten particularly hot in Kansas City.
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