HP REPOST: A&E Programming Note: "Flip This House" name change. Now "Scam This Country"

I've gotten tons of email and posts today about the A&E Flip This House scam, because yahoo and the AP finally ran a story (weeks later). So here's the repost. HP also got mentioned in the Kansas City Star on this subject. Nice to see the MSM chasing their tail (and the blogs).

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I'm sorry. I thought today was May 16. I didn't realize it was HousingPANIC Christmas! The gifts just keep coming!

Fox News Breaks "Flip This House" Case

If you ever wanted to know whether the real estate investors who say they make a lot of money are telling the truth or not, don't expect to learn it by watching A&E's "Flip This House."

In a stunning investigative report, Fox News Atlanta actually did their homework and found out that Sam Leccima, one of the 'stars' of the popular Fix/Flip weekly show had been involved in staging phony transactions, performing shoddy renovations, and, in the most bizarre bit of fakery, planting and un-planting landscaping for the cameras.

Mr. Leccima, when asked about the allegations, responded, "It's a television show."

Fox Atlanta also poked fun at A&E for not even bothering to check that Mr. Leccima had recently had his real estate license revoked by the Georgia real estate commission, before the show began airing, and now may be under investigation by the Georgia Attorney General for securities issues.

$1,800 a month disability payment. $150 child support. And yup, $894,000 in Alt-A Liar's Loan debt. Party over.

Just read the whole article in USAToday on Friday. Then ask yourself - how will IndyMac (the Liar's Loan king) ever stay in business? And do you see now how home prices got so wildly and briefly inflated?

Corrupt commission-hungry mortgage brokers, out-of-control fraud and greed, IndyMac and other Alt-A lenders with no oversight, hedge funds buying up the debt, and then... the party ended.

Let's clean up the mess everyone.

(yes, I'm short IndyMac and yes, this whole scheme is caving in)

Neighborhood finds real estate loans too good to be true

Soon, mortgage applications — almost entirely blank — arrived in the mail. Darden signed and returned them. In November, Darden closed on the first house. In December, she closed on a second.

She'd been preapproved for $360,000. Now she was borrowing $894,000.

It would cost her $7,194 a month.

It wasn't until seven months later, though, after she struggled to find tenants and maintain the buildings, that Darden began to wonder just what had happened. It began to make sense only when she studied the finished paperwork.

When she bought, Darden was receiving $1,800 a month in disability payments — as she recovered from a collapsed lung — sometimes supplemented by child support of $150 a week.

But the mortgage application described a woman she did not recognize: an administration manager for a medical supply company, earning $114,000 a year.

Meanwhile, the real Frances Darden was quickly falling behind.

One of the most notable things about Frances Darden's story is how much it echoes the others.

Valerie Hayes says she knew something was very wrong when she went to close on the $440,000 loan for her house, a two-family in East Boston. She'd agreed to $2,300 payments because of expected rental income. But the documents listed payments at $3,300 a month.
"I see the real mortgages and it's apparent to me I got robbed," Hayes says, "but I'm thinking I'm going to make this work."

Why didn't she walk out? Because she'd already given up her old apartment and had a tenant waiting to move in. Within months, though, maintaining the building depleted savings already strained by the mortgage payments. That's when she noticed the reference to a second job — one she never had — earning a fictional $1,846 a month working for Champagne.

Late last year, Hayes moved out and the lender began foreclosure.

Others are still trying to hold on.

There's Macdala Louis, a nursing assistant, who bought on Edwin Street. Her loan application said she had a second job working for a company, Hart Professional Cleaning, that does not appear to exist.

And Jennifer Stone, a medical assistant who bought a $489,000 home with her partner, a special police officer.

"They said we had accounts we didn't even have. They said we had $50,000 in the bank," Stone says. "I didn't even have $700 in my 401(k)."

Poor people should not live in big houses and drive nice cars. Debt is not wealth. A lesson will be learned.

It absolutely amazes me to read some of the comments from trolls on this blog - mocking people for saving, for being frugal, for clipping coupons, for driving 5-year-old cars, for living within their means, for buying things with cash versus credit.

What's happened to our world where 20 year olds live in McMansions and drive Mercedes cars, while making $50,000 a year? How screwed up are we when people rack up insane amounts of debt in order to look successful, when it's so obvious that the only thing they've been successful with is acquiring debt?

The Great Unwinding is also going to be The Great Smack Your Ass and Wake You Up for Generations X and Y. You work your way up in this life, you don't magically just get there without work and without making a decent living (unless your parents are rich of course).

A generation of spend spend spend, me me me, fake fake fake will now learn learn learn. And the credit crunch will be the catalyst.

Just ask any senior about how their grandkids are carrying on with their big houses, big cars, big TVs, and big debt loads - you're likely to get the same answer, "I don't know how they pay for all of that".

Well, they don't pay for a lot of it.

Never before has credit flowed so freely and never before has so much debt accumulated. Never before has it been easier to buy a house. That is, if you don't mind non-traditional mortgage products where no money down is needed and not only can you avoid paying down the principle (interest-only), but you don't even have to pay all the interest due (pay-option).

Of course, as a long-term plan, this looks like it may not work out so well now that housing prices are falling and subprime lenders are falling even faster.

The younger set has been fearless when it comes to taking on new debt over the last ten years. This is likely to change in the next ten years - all part of the Alan Greenspan legacy.

It's too bad that Lemming suicide is a myth - it would have provided a fine analogy for the headlong rush by youngsters toward the dream of homeownership and sure riches. The trouble is that nontraditional mortgage products, subprime lending, short sales, and foreclosures are no myths.