A Lot Of People Are Going To Take A Walk
A report from the Arizona Republic. “When the housing market crashed, inflated appraisals were a factor, especially in connection to mortgage-fraud schemes that artificially inflated home prices and made the fall in values all that much steeper. Julie Friess has been a Sedona appraiser for 22 years and is part of the Coalition of Arizona Appraisers working to strengthen state regulation of the profession. ‘A few years ago,’ she said, ‘we had an appraiser whose motto was he could ‘hit any number’ needed to close a deal with his appraisals, and he was getting a lot of business. He shouldn’t have had a license because he hadn’t completed the requirements. We couldn’t even get his licensed pulled.’”
“In May, a national code adopted by the biggest lenders went into effect, restricting who can order a home appraisal. Called the Home Valuation Code of Conduct, or HVCC, the code was drafted to combat inflated home valuations and has stirred a lot of controversy in the real-estate industry. Some homebuyers and sellers are also unhappy with the HVCC process. They say AMCs hire appraisers who aren’t always familiar with the area, which results in low valuations.”
“‘The appraisers were part of the problem when the housing market was booming by appraising homes above value and collecting their fees,’ said Bob Lightner, who is trying to sell his home in Anthem. ‘Now that the housing market has declined, the appraisers are keeping selling prices low by appraising homes below value.’”
The Arizona Daily Star. “A former Tucson real estate agent faces up to two years in federal prison after pleading guilty Tuesday to his role in a mortgage fraud scheme that he admitted involved taking out fake loans to inflate local home values. Roy Fife pleaded guilty in U.S. District Court to one count of conspiracy to commit wire fraud and one count of conspiracy to commit money laundering. He and another Tucsonan, Chris Nero, were indicted in June 2008 on 48 counts of wire fraud, money laundering and conspiracy.”
“According to the indictment, Fife and Nero enlisted ’straw buyers’ to take out at least 27 fake loans in their name to purchase at least 17 homes they would neither live in nor pay the mortgage on. The loans would be for above the asking price on the home, with Fife, Nero and the straw buyer sharing in the excess proceeds, according to the indictment.”
“Fife and Nero were two of 36 people in Arizona and more than 400 nationwide that federal authorities targeted in 2008 as part of a U.S. Justice Department investigation dubbed Operation Cash Back.”
The Grand Junction Daily Sentinel in Colorado. “The owner of failed Valley Investments is to appear in federal court today in Grand Junction to answer charges in connection with the failure of a company that authorities allege operated as a Ponzi scheme. Valley Investments owner Philip Rand Lochmiller was arrested without incident Wednesday. He, his son, also Philip R. Lochmiller, and an employee, Shawnee Carver, were indicted on multiple counts Tuesday.”
“Lochmiller, according to the U.S. Attorney’s Office, opened Valley Mortgage, later to become Valley Investments, in 1994 as a mortgage broker and originator. Around 1999, the Lochmillers and others entered the affordable-housing, real-estate-development and housing-for-sale business. Valley Investments acquired five properties, which the Lochmillers told investors were to be developed as affordable-housing subdivisions, the indictment said.”
“The Lochmillers told investors they used investment funds only to acquire and develop affordable-housing projects, and that the company generated large profits by selling manufactured homes together with lots within their subdivisions. Some investors were promised returns as high as 18 percent annually. Investor Jacque Loesch of Battlement Mesa said she was pleased Lochmiller had been arrested. ‘He’s pretty well ruined my life,’ Loesch said. ‘It’s a good thing I’m not a real down person. I’m basically living off Social Security.’”
The Denver Post in Colorado. “Developer Erik Osborn testified at his felony trial Tuesday that he spent five years and several hundred thousand dollars working on a downtown luxury condominium project but has not seen even $1 for his efforts. Osborn, on trial in Denver District Court, is accused of two third-degree felony counts and faces up to 24 years in prison if convicted.”
“Osborn’s investors in One Lincoln Park, who also included talk- radio personality Tom Manoogian, paid $1.9 million for the lot where the 32-story building sits and another $3.5 million to build a sales center. ‘I think they’re taking action right now to make sure I don’t ever get a penny from this,’ Osborn said.”
The Aspen Times in Colorado. “The recession has derailed the ‘renaissance’ of Snowmass Village, but a glimmer of hope has emerged with the opening of an upscale ski-in, ski-out hotel. The Viceroy is part of a multi-year building effort by Related WestPac, the real estate development firm behind Snowmass Base Village. The commercial and residential center has yet to be completed due to Related WestPac’s financial woes, leaving the centerpieces — a Little Nell hotel and arrival center — nothing more than concrete slabs at the base of the ski area.”
“The Viceroy is a condo-hotel, meaning that all units are for sale as whole-ownership interests. About 80 units have gone under contract with Related WestPac but none have sold yet. Roughly 19 prospective owners are legally trying to break free from the purchase contracts and get their deposits back. The deposits were 15 percent of the purchase price. Sales price figures were based on a price of about $1,700 a square foot per unit.”
“‘We feel certain we have fulfilled our duties and obligations in those sales contracts, and we look forward to completing the closing process with those purchasers in the near future,’ said Dwayne Romero, president of Related WestPac.”
“Viceroy General Manager Jeff David said opening a hotel in a severe recession hasn’t really changed the business model, but the 2010 budget now reflects a more modest revenue projection. ‘We certainly don’t have the mentality that if you build it they will come,’ he said. ‘If the economy turns, we could break even in two or three years and that’s not a reach. It’s achievable.’”
The Las Vegas Business Press in Nevada. “The hard-money lending industry, which provided fuel for real estate development in Southern Nevada and double-digit interest rates for investors, is a ghost of its former self now that the boom has turned to bust. That’s no surprise to real estate professionals. After all, hard-money lenders made the riskiest of loans to developers who often had no more than a plan and a raw piece of land.”
“‘People are just surviving and trying to take care of investors they have in loans,’ said Jeff Guinn, owner of Aspen Financial. ‘They are trying to hold on until the market comes back.’”
“To put things in perspective, hard-money lenders pumped out $286.2 million in 120 loans in Southern Nevada in March 2007 before the real estate industry imploded, according to the Nevada Mortgage Lending Division. In October this year, Las Vegas area hard-money lenders made 16 loans totaling $2.8 million. That’s lower than the $7.4 million in 15 new loans in September. It’s way below the $23.3 million in 15 loans in October 2008.”
“One company is managing to make new hard-money loans: CM Capital Group, formerly known as Consolidated Mortgage. CEO Todd Parriott said his company has originated about $100 million in short-term mortgage loans, sometimes called trust-deed investments, since the first of the year. The bulk of the loans were secured by real estate in Nevada.”
“CM Capital Group is managing $465 million in assets, including about $400 million in foreclosed properties. Individual and institutional investors have fractional interests in some of the loans. After Southern Nevada’s real estate sector went into a free fall two years ago, about 95 percent of existing loans at CM Capital went into default, Parriott said.”
“‘We weren’t lenders anymore,’ Parriott said. ‘We were asset managers.’”
