February 11, 2008

HousingPANIC Quote of the Day

"The entire real estate debacle is the fault of everybody that was involved. And it was all about greed and speed. The brokers wanted their commission. The lenders wanted their premiums. The borrowers wanted their homes."

- Rachel Dollar, a Santa Rosa attorney who represents lenders in fraud and other cases, February 2008

From a great article "Loans Built on Lies" in the Santa Rosa Press Democrat (thanks HP'ers - looks like more MSM have been reading the bubble blogs.

And why aren't the Feds investigating EVERY SINGLE STATED INCOME LOAN taken out in America these past few years? The United States is no longer a nation of laws. We're a nation of mortgage fraudsters who are simply getting away with crime (while stiffing the banks and ruining neighborhoods)


born to lose said...

Americans of today are no better or worse than any other generation.

The banks deserve to get stiffed.
They speculated on the real estate market with OTHER PEOPLES MONEY, did very well for a long time, got wreckless, now they are getting their asses kicked.

" Laws are like cobwebs, they catch flies but they let wasps and hornets go free"

The people who live in the neighborhood make it good or bad.

If the neighborhood is "ruined", its a reflection of the quality of people who live there.

Marky Mark said...

The single best way to fix this mess and never let it happen again:

Require a minimum of 20% down of the buyers money (no piggy back loans, etc.).

Require that all fees and commissions be paid pro-rated over 2 years to all parties involved. If the borrower fails to pay - all of this money is then held in escrow pending resolution.

Marky Mark

Frank@Scottsdale-Sucks.com said...

"And why aren't the Feds investigating EVERY SINGLE STATED INCOME LOAN taken out in America these past few years?"

Because that would be totally impractical and prohibitively expensive to hire enough agents to do it.

Look, these people will pay a far worse price - financial ruin/bankruptcy, and destroyed credit. And since these liar loan people's entire self-worth is based on how big of a house & car they can get on credit, they're f*cked.

Imagine your typical Scottsdale phony who suddenly got their credit taken away. They'll probably be suicidal.

I still like my idea - a foreclosure that resulted from a liar's loan, or from a homedebtor walking away and turning in the keys, should stay on their credit reports FOREVER and not 7 years.

Vectorz said...

Frank, although I'd hope that were the case, I seriously doubt it. Foreclosure these days do not harm your credit that much. Even BK barely does especially when so many people will have them at the same time.

Anonymous said...

It's too late to go back and investigate the all of the crimes now. THey should have nipped it in the bud in 2003. A few high profile arrests back then would have prevented the bubble. That would be asking the FBI to be proactive, which they are not good at. They had prior information on the 1993 WTC bombing, Ok City bombing, 9-11 WTC attacks, yet sat on their hands until after the SHTF. They did the same thing here. The mortgage fraud was everywhere for years, and they're just now beginning to investigate.

eric in vegas said...

"Imagine your typical Scottsdale phony who suddenly got their credit taken away. They'll probably be suicidal."

That will be the biggest punishment of all: having to live within their means. People are going to start freaking out when they can't just tap the heloc for that new car or put that 60" TV on the credit card because the CC company closed their account.

Mark in San Diego said...

Yes - read that yesterday while I was up in Sonoma. . .really good article. . .my hosts were rather quiet. I am afraid this has a long way to go, as some people here in San Diego think a one bedroom condo is a bargain for 300K, just because it was 400K two years ago. . .I keep telling them that Cisco looked like a bargain at $40, when it was $70, but it was a REAL bargain at $9!!!

DEA agent said...

Because all our resouces are being used to catch the HS kid with a joint.

myownboss said...

Why should every 'stated income' loan be investigated? Those loans were meant for self-employed people. I have one and I haven't been late a single time on my payments. I'm not a dead-beat, I haven't stripped out my equity with 2ndry loans; I'm just self employed.

Maybe you should save your outrage for those who are being foreclosed or walking away on stuff they couldn't afford, whether they went stated income or not. Don't tar us all with one feather.

win/win said...

Investigating stated incomes loans is such a win-win proposition.

Either the person lied on the loan application and you have a simple slam-dunk mortgage fraud conviction.

Or, they didn't lie on it, in which case they lied to the IRS on their tax returns (or didn't file any in the first place) so you have a simple slam-dunk tax evasion conviction.

The second case is of course better from the point of view of the government since the taxes+penalties will higher than any fine on the first case...

I know in Australia they did the second years ago, the tax office won a court case to get stated income loan documents from banks so they could trawl them for mismatches with tax returns: http://tinyurl.com/328lm3

westwest888 said...


Bob Toll's daughter canceled her Miami condo built by Toll Brothers. Bob Toll says it wasn't because of market conditions.

I don't even know what to say any more. Nothing shocks me.

Anonymous said...

The builders are still building here in Green Bay. Why I don't know. There is vacant commercial space all over the place. But they keep on building.

Anonymous said...

February 11, 2008
Burning Down the House
Behind all the blather and bullshit about the Federal Reserve's rescue gambits and the machinations of the ratings agencies, and the wiles of foreign sovereign wealth, and the incomprehensible mysteries of markets, and the various weather forecasts of a gathering "recession" is the simple fact that the USA is a way poorer nation than we imagined ourselves to be six months ago. The American economy has been running on the fumes of "creatively engineered" finance (i.e. new-and-improved swindling) for years, and now these swindles are unraveling. In their aftermath, they leave empty wallets, drained bank accounts, plundered retirements funds, boiled away capital reserves, worthless stocks, bankrupt companies, vandalized housing tracts, ruined families, and Wall Street executives who are still pulling down multimillion-dollar pay packages despite running their companies into the ground.
We're burning down the house and kidding ourselves that there is a remedy for it. All the rate cuts and loans to big banks and bank-like corporate organisms, and "monoline" bond insurers, and mortgage mills amount to little more than a final desperate shell game to conceal the radioactive pea of aggregate loss. The losses are everywhere, and when you add up seven billion here and eleven billion there they probably amount to something like a trillion dollars in sheer capital evaporation -- not counting the abstract "positions" that the capital was leveraged onto by the playerz and boyz who mistook algorithms for productive activity.
The shell game may run a few more weeks but personally I believe the timbers are burning. The losses are no longer "contained" or concealable. A consensus has now formed that we're in for a "recession." The idea is that, yes, this seems to be the low arc of the business cycle. Fewer Hamptons villas will be redecorated in the interim. We'll gird our loins and get through the bad weather and when the sun shines again, we'll be ready with new algorithms for new sport-with-capital.
Uh-uh. Think again. This is not so much financial bad weather as financial climate change. Something is happenin' Mr Jones, and you don't know what it is, do ya? There has been too much misbehavior and it can no longer be mitigated. We're not heading into a recession but a major depression, worse than the fabled trauma of the 1930s. That one occurred against the background of a society that had plenty of everything except money. Back then, we had plenty of mineral resources, lots of trained-and-regimented manpower, millions of productive family farms, factories that were practically new, and more than 90 percent left of the greatest petroleum reserve anywhere in the world. It took a world war to get all that stuff humming cooperatively again, and once it did, we devoted its productive capacity to building an empire of happy motoring leisure. (Tragic choice there.)
This new depression, which I call The Long Emergency, will play out against the background of a society that has pissed away its oil endowment, bulldozed its factories, arbitraged its productive labor, destroyed both family farms and the commercial infrastructure of main street, and trained its population to become overfed diabetic TV zombie "consumers" of other peoples' productivity, paid for by "money" they haven't earned.

There is a theory that a reform process will now ensue in the financial realm, new regulation and oversight of the same old familiar activities. This too, I'm afraid, will prove to be wishful thinking. The financial system will not be reformed until it lies in smoking wreckage, and when that "re-form" happens the armature of the re-organizing society will barely resemble the one that the previous burnt-down-house was designed to dwell in. Among other things, it will not support capital enterprise at anything like the scale that we became accustomed to lately. Globalism will be over. The great nations of the world will be scrambling desperately for the world's remaining oil supplies. It will not be a friendly contest, and anyone who thinks that current trade relations and capital flows will continue despite that is liable to be disappointed. (Are you reading this Tom Friedman?)
Long before the mathematical projections of oil depletion play out, the oil markets themselves -- and all the complex operations that they comprise, such as drilling and exploration, and the movement of tankers around the planet -- will destabilize and seize up. We will no longer be any oil exporter's "favored customer." Many of the exporters will enjoy watching us suffer. Contrary to the political platitude-du-jour, the USA will never become "energy independent" in the way we currently imagine. Rather we'll become energy independent by being deprived of imported oil, and we'll be thrown back on our own dwindling supplies -- which means that we're not going to run our system of daily life the way it has been set up to run. When Americans can no longer run their cars on a whim, they will simply go apeshit and you can kiss normal politics goodbye.
The financial system that emerges from this cataclysm, and the economy it serves (which is supposed to be the master of its capital deployment "arm," not its servant) will likely be modest to a degree that will shock and embarrass everyone currently connected with what we have lately called finance. If it even trades in paper, that paper will have to stand for something based in reality, either a productive activity or a genuine asset. It may take decades for this society to even regain the confidence necessary to operate such an elementary system -- or it may not come back at all, at least as far as the horizon lies before us. That's how bad the mischief and the damage has been.
It's not hard to understand why the Bernankes, Paulsons, Lawrence Kudlows and other public representatives of capital keep pretending that everything is under control. On the other side of their pretenses lies disorder and hardship. One wonders, of course, what they really see in their private minds' eyes. Do they actually believe that the statistics issued by their serveling agencies amount to a plausible picture of reality? Are they so lost in their fantasies of "management" that they think they're controlling events?
My guess is that their credibility is spent. In the weeks ahead, nobody will know who or what to believe. We may even run out of questions to ask as we just all collectively stand there in a thrall of wonder and nausea, watching the nation's financial house burn down.

Anonymous said...

The builders are still building here in Green Bay. Why I don't know. There is vacant commercial space all over the place. But they keep on building.

February 11, 2008 9:31 PM


It's the same here (Buffalo/monticello minn) Empty vacant commercial space everywhere. We already have one of every friggin chain store possible, what is going to fill the space? A second dairy queen? Another Tire franchise?

Anonymous said...

An attorney WOULD know all about extreme GREED AND LIES.

DOPES said...

"Under The Mortgage Forgiveness Debt Relief Act of 2007, up to $2 million of the cancelled debt on a principal mortgage is now tax free. The new law does not apply to investment property."








brokersleaveyoubroke said...

I read a very disturbing story the other day. There is a class action lawsuit against Wachovia bank that claims they knowingly processed checks from telemarkerters who were engaged in various scams. Federal regulators knew for years about the fraud, they warned the bank many times but in the end they did nothing. Hopefully this suit will expose as much fraud in the government as in Wachovia.

Anonymous said...

Six of the largest U.S. mortgage lenders will announce on Tuesday a program to identify seriously delinquent borrowers and halt any foreclosure process while they try to work out a new payment scheme, sources familiar with the plan said.

Anonymous said...

Foreclosure these days do not harm your credit that much. Even BK barely does especially when so many people will have them at the same time.

That may be the case, but if some consequences are not suffered for their actions, whats to stop them from walking away again if things get a little tough. Banks need to keep that in mind before lending again to these people.

tater said...

"The builders are still building here in Green Bay. Why I don't know. There is vacant commercial space all over the place. But they keep on building."

Same things happening near my home. Builders still just plugging away, putting more houses on the market. I noticed a HUGE residential developement getting started just up the road from me. I don't know why they're starting it, because there are HUNDREDS, if not THOUSANDS of lots in the general area of my home state that are empty of everything except weeds.

satan said...

I have another reason why borrowers fell for this bubble.

Have you considered that taxes on extra income are much more than the rates on interest on most loans (even subprime).

It is therefore much better in the short term (1-5 years)to borrow rather than earn extra money, especially since one does not have to work any more than before.

In the worst case scenario, one can foreclose and walk away. And if millions do it, the government won't charge taxes on the capital gains on short sales.

satan said...

This is not a repeat of my last post, but more of in depth rant/ criticism/ suggestions for getting out of this hole.

I have another reason why borrowers fell for this bubble.

Have you considered that taxes on extra income (IRS, SS, Medicare, AMT, State income tax etc) are much more than the rates of interest on most loans (even subprime). It is therefore much better in the short term (1-5 years) to borrow rather than earn extra money, especially since one does not have to find another job or work any more than before.

In the worst case scenario, one can foreclose and walk away. And if millions do it, the government won't charge taxes on the capital gains on short sales.

The underlying problem however is that most people's income has not kept up with real inflation and good job opportunities are shrinking everyday. Unless that is fixed with real progressive taxes (rich have to pay more), reduced government spending, government and institutional transparency (accounting) and a change in the attitude of everyone we are never really going to recover from this debt trap.

The reality is that both medical and income benefits for retirees (the big scare of the next decade) could be easily fixed if we were a more rational society.

The majority of life extension in the last century has come from better water, food, sanitation, antibiotics, better working conditions, better emergency care and treating chronic conditions like hypertension. More than 98% of the increases in longevity can be maintained by spending as little as 100 dollars per person/ month. That is why the average life expectancy in a communist hell hole like Cuba is identical to the USA.

The biggest chunk of medical expenses occur in the last 6 months of a persons life and their value to the individual and society are highly dubious.

Housing could be made a commodity like cars and computers. We have millions of shipping containers from China at our dockyards. Refitting them as houses could make it possible for anyone to get a very good quality house for less than 50k. Architects and engineers can create some very stylish houses with these shipping containers.The funny thing is these houses would be far more structurally sound than the 800 k" luxury"stucco boxes.

hmmm.... said...

"Don't do it." - Former US President, Republican, Gerald R. Ford, 2003, when asked if Bush and Cheney should invade Iraq.

Hmmmm.... I wonder why Bush and Cheney refused to take the oath of truth and honer in front of the 9/11 investigation panel?

Hmmmm... Smells fishy to me.


Anonymous said...

You can always count on the retarded pot heads to come out and blame the world's problems on drugs being illegal. The DEA has nothing to do with mortgage fraud. If the DEA was disbanded, those agents would not be out there catching mortgage fraudsters. Get that through your drug-fried brains.

Anonymous said...

Hey Keith,

I just read that credit card companies are turning down applications at just over 30% ratio. They are weeding out people who are overextended and lowering or eliminating lines of credit to FB's.

Tightened credit card standards cannot bode well for JOE SIXPACK!

County of Riverside just laid off 40 workers from the building dep. due to a 40% cutback in workload. The City of Riverside is now having big problems with their budget and are contemplating layoffs. School district has announced major cutbacks in funding and are also contemplating layoffs.

Made a trip to Orange County this weekend and it also appears they are being affected by downturn. Many for lease signs, liquidation signs, and business closed signs.


Anonymous said...

Well isnt this a nice idea, prison for people who saw the housing values rise with thier own eyes.
Prison for the ones who listen to thier parents, friends, realatives, realtors, appraisors, home inpectors, mortgage lenders, accountants, tax advisors and insurnace agents, retirement/financial advisors.
Yes arrest us all for getting bad financial advise from F*cking EVERYBODY we asked at the time.

Too bad HPers...............
Monday morning quarterbacks dont make the rules.

Homedebtors are now facing certain death. What happens when you push a man too far? He fights back with everything hes got. Look what just passed in record time, a huge money drop from the scared shi*less administration. Homedebtors will bring the rigged stock market and the corrupt mortgage/bank credit market to its knees. The power the consumer has right now is more than evident. We will get our mortgage balances reduced and our intrest rates fixed and HPers will just go balistic over it, but there is always the next bubble....gold is looking a little high to me but maybe I should ask one of my advisors......hmmmmm..........

gross idiot said...

The geniuses still don't get it:

Gross: Drop Down Payments on New FHA Loans

Monday, Feb. 11, 2008 9:31 a.m. EST

With home sales plummeting, credit market expert Bill Gross thinks it’s time for dramatic government action to prevent a full-blown meltdown –- including much easier terms, immediately.
Founder and chief investment officer of PIMCO, the world's largest fixed income investment manager overseeing $746 billion in assets, Gross said that, unless the government intervenes, home prices could drop by up to 20 percent over the next two years.

Existing home sales already fell by 22 percent last year, according to the National Association of Realtors. Prices are plummeting, off by more than 20 percent in some markets according to the Case-Shiller Indexes. "We need the FHA to provide mortgages with…a subsidized interest rate. Instead of 5.5 or 6 percent, they could put 4 or 5 percent,” he told U.S. News & World Report.

He also proposes that the FHA "minimize, if not eliminate, the down payments, so people can afford to buy not only a new home but an existing home.”

Gross acknowledges that eliminating down payments contributed to the subprime crisis.
"But now a government agency is overseeing the list of buyers as opposed to ‘greedy’ loan originators that just ran it for a fee,” he says. "I think that's what's required.”

Of course, housing prices spiraled upward in the first place because of easy lending standards.

Too many borrowers were allowed to buy homes without having to prove they had the income or assets to make the mortgage payments. Low interest rates, no down payment loans, and low mortgage teaser rates compounded the problem.

Now, Gross thinks, the only way out is to follow the path that got us into this mess. He thinks the Federal Housing Authority (FHA) is the best positioned agency to lead the nation toward higher home prices.

Anonymous said...

The people that put the money up for these loans were told that the loans were low risk . So I don't know why one poster said that they deserved to get "stiffed ".

The loan agents and borrowers ,with the help of your friendly real estate salespeople, set up the greedy borrowers to commit fraud .The borrowers were willing to submit or sign a fraudulent loan package to get the house .

While it is true that the lenders did not do their job in regulating commissioned sales people and their borrower clients,it still doesn't excuse fraud on the part of these parties .

This sort of widespread loan fraud is like any crime in that it will have the effect of damaging the innocent . Just like the margin buying of stock during 1929 brought the whole Nation down ,the defaults of real estate loans will have the potential of creating pain and suffering for all .

The fake housing boom prices where the direct result of widespread fraud in lending ,combined with hit the mark appraisals . The fraudulent borrowers don't deserve to rip off the banks more by walking ,but they walk because they can't live up to their end of the contract because it was conceived in fraud . It's just one big excuse for fraud borrowers to say that the victims deserves the loss.

Because of fake rising prices ,did old people deserve to have to leave their homes because they could not afford taxes anymore on fake inflated prices ? Did people who were priced out of the market because of this widespread loan fraud deserve to even pay more rent because of fake prices ? Do people who never even bought a house deserve to endure inflation because of the Feds rescue plan low interest rate policy . Do savers deserve having the penalty of being paid hardly anything for saving accounts ,or paying more taxes in the future to pay for bail outs ? Do innocent people deserve the eyesore of vacant houses and the crime that follows ?

The borrowers that committed loan application perjury ,or cash -back fraud ,do not deserve to walk ,and they should walk them right into jail ,and they don't deserve shit .

I believe that once the Lenders perceive that loan application liars are walking in groves ,they will exercise their right to charge the borrowers ,who will lose any recourse because of the fraud .This will be especially true on deals/loans where the losses are huge because of the fraud .

Anonymous said...

Borrowers who say they were victimized by stated income loans are a big fat liars. They committed fraud when they signed their Uniform Residential Loan Application at closing -> see Title 18, United States Code, Section 1001. Under the law no one is excused for lying on a loan application, including lying about income or residency.

Every set of loan docs I have seen stated explicitly under the borrowers signature that that they were signing under penalty of purgery/title 18, etc, and that they certified that everything in their application was true. And yes, it was a copy of that application they were signing!

And yet while booking mortgages, I saw papers pass by my desk all day long that said the "self employed construction worker" made 10,000/mo. My company also bought 3 1st mortgages in one month from the same guy who bizarrely claimed that all three properties would be his primary residence after closing (even though he worked far away and already lived in a much nicer house).

It makes me sick to hear these liars whining now. "The mortgage broker said it was OK" is not a legitimate legal excuse purgery. Of course, we all know nothing will happen to lying FBs. Casey Serin wins again.

Anonymous said...

Message from the bankers at the top: