A mortgage fraud report from the New York Times. "On May 18, 2005, a small Indiana company bought 184 duplex homes in a down-and-out neighborhood in northeast Indianapolis for an average price of $50,000 each. The company, Land Economics, began selling the properties for $120,000 apiece to church secretaries, truckers, retirees and factory workers, sometimes as many as three a day to a single individual. As recently as September 2004, homes in this neighborhood sold in a range of $20,000 to $65,000."

"Amid the boom, those details hardly seemed to matter. Federal investigators are still trying to sort out the scope of what some are describing as one of the largest cases of mortgage fraud in recent years. Countrywide Financial, which bought the Indianapolis loans soon after they were written, has filed a lawsuit seeking damages from Land Economics, its principals and others involved in the deals."

"The Indianapolis situation may prove to be the most vivid example yet of how the boom in housing has provided fertile ground for mortgage fraud, industry experts and regulators say. Rising home prices served as cover for quick-flip plans and an easy hook to recruit investors."

"And the boom created incentives for the mortgage industry not to look too closely. As the appetite for home loans soared on Main Street and Wall Street, the industry came to increasingly rely on networks of independent mortgage brokers, appraisers and other officials to keep the lending assembly line well supplied. All had incentives to minimize hold-ups."

"'If the deal doesn’t go through, nobody gets paid,' said Bill Matthews, a senior vice president at the Conference of State Bank Supervisors."

The Rocky Mountain News. "Denver-area home sales and prices were weak in September, according to reports released Thursday. In addition, the housing market may be in even worse shape than the monthly reports indicate because of the way the statistics are being collected and because of rampant fraud, a top real estate executive said."

"'The (real estate) industry's biggest problem right now is loan fraud,' said Chris Mygatt, president of the largest residential real estate company in Colorado."

"'We have been seeing many more homes on the market, and average prices (in most months) are going up, which does not make any economic sense,' said independent broker Jerry McGuire."

"Two days ago, a broker severed a listing agreement with the seller of a home priced at $850,000 because the broker suspected he was involved in a fraudulent sale. 'For five or six months, the home received zero offers,' Mygatt said. Out of the blue, the seller received an offer for $1.1 million, $250,000 above the asking price."

"Mygatt suspects the buyer will pocket the $250,000 and let the house go into foreclosure. But before that happens, the home will be listed as a $1.1 million sale, helping to skew the Metrolist numbers higher, he said. He said these kinds of deals, often with lower-priced homes, are becoming increasingly common. 'This could not work without appraisal fraud,' Mygatt said."

"Mygatt said he thinks about 25 percent of the near record 31,450 unsold homes on the market will 'statistically never sell' because their mortgages are higher than their potential sale value. That means those houses eventually will end up in foreclosure, he said.

From the Gazette. "A sharp drop in home construction continued in September, putting the local housing industry on pace this year to build the lowest number of homes in nearly a decade. The slowdown is rippling through the industry, prompting some builders to lay off workers and others to add incentive packages, although they say nobody is pushing the panic button."

"Classic Cos. has started offering discounts of 4 percent on pre-sold homes and 5 percent on its speculative inventory, an incentive that will translate to several thousand dollars, Joe Loidolt said."

"George Hess, who’s the incoming president of the Colorado Springs Housing and Building Association board, added that speculators, buyers who purchased homes with the intent of quickly selling them, might have driven part of the building. A glut of resales on the market, August’s local used home inventory was up 35 percent from a year earlier, also is providing plenty of competition for the new home industry."

"Super-low mortgage rates sucked all types of buyers into the marrket, many of whom might not have ordinarily bought a home. 'Low interest rates created a situation where the market borrowed buyers from the future, and people who probably would have been buying today or tomorrow actually bought a house yesterday and the day before,' Colorado Springs economist Dave Bamberger said."

"Easy financing on the part of lenders also contributed to the wave of home construction, Fred Crowley, a University of Colorado at Colorado Springs economist said. 'It wasn’t that we overbuilt,' he said. 'We overfinanced.'"