“There Appears To Be No End” To Denver Foreclosures
The Denver Post from Colorado. “Two years ago, Colorado issued a warrant to arrest Taiwan Lee, a state prisoner who had vanished on parole. He hadn’t gone far. While police looked for him, he bought three houses at inflated prices in Arapahoe County with the help of lenders who put up the entire $1.9 million.”
“After he was caught and jailed, he managed to buy two more. Until the foreclosures commenced, Lee owned five villas in an affluent gated community while living behind prison bars 150 miles away.”
“In the Denver metro area alone, more than 1,000 homes sold for at least 110 percent of the original asking price in the 18 months ending in June, according to research.”
“The Denver Post searched foreclosure records on 739 of these homes sold between January 2005 and April 2006. Already, 55 have been foreclosed, or one of every 13 homes, an extraordinary number even in a state where one of every 408 homes is in foreclosure.”
“‘It clearly is a problem,’ said Colorado Attorney General John Suthers. ‘We have been looking at house purchases over cost and money going back to the buyers.’ Suthers’ consumer protection chief, Jan Zavislan, said the office is investigating various participants in inflated sales, including buyers, sellers, appraisers, mortgage brokers, real estate agents and title companies.”‘
“We’re looking at potentially every participant in these transactions,’ Zavislan said. ‘We’re just seeing way too many of these things.’”
“Critics say mortgage companies have little incentive to ferret out inflated sales because they bundle and resell their home loans to Wall Street investors, taking their profits and diluting fraud losses in large pools of mortgage-backed bonds.”
“These securities get ’sold in little pieces all over the world,’ said Lou Barnes, a Colorado mortgage bank owner. ‘It makes it very difficult to figure out who, if anyone, bears any responsibility for the flow of Colorado’s foreclosures.’”
“Marc Loewenthal, a senior VP of New Century Financial Corp., says his company’s mortgage subsidiary financed and resold loans on four of the allegedly fraudulent villa purchases. But ‘the investor has the right to demand we repurchase the loan if there is fraud involved,’ he said. ‘We’re at risk. We do have an interest in keeping fraud down.’”
“New Century grew concerned enough about fraud to install a new screening technology early this year, he said. As a result, ‘we have stopped close to $1 billion in loans.’”
The Rocky Mountain News. “Prompted by local business leaders’ concerns over the area’s real estate market, economist Patty Silverstein has issued a report that says Denver’s high foreclosure rate will continue, somewhat abated, into 2007.”
“Residential foreclosures in metro Denver are on pace to hit a record high in 2006 of about 19,200. Through the third quarter, 14,132 foreclosure cases were opened in the seven-county region, a 34.2 percent increase over the January-September period in 2005.”
“What’s happening, Silverstein said, is a longer lag between the negative job-loss news and the foreclosures, when compared with Denver’s problems in the 1980s. During the last great foreclosure boom, it was roughly two years between Colorado’s job losses and its high foreclosures, Silverstein said. Colorado’s recent job- loss peak, in 2002 and 2003, is now three to four years in the past.”
“‘Given the severity of it and the slow growth since then, we’ve had a longer lag,’ she said.”
“New or recently popular mortgage products also have played a role, Silverstein notes, and ARMs represent a disproportionate share of Colorado foreclosures: In the second quarter of 2006, 52.5 percent of the loans in foreclosure in Colorado were ARMs, compared with 35.7 percent nationally.”
The Denver Post. “Despite solid growth in jobs, incomes and population, metro Denver’s foreclosure rate is on track to hit 1.7 percent of all homes this year, according to an analysis. That rate is a midpoint between last year’s 1.3 percent and a record 2.1 percent set in 1988, when an oil bust drove up unemployment levels and more people were leaving the metro area than moving in.”
“The high foreclosure rate in Colorado, which has led the nation for the past seven months, is part of a downward trend in the overall housing market.”
“Builder incentives and price cuts are putting pressure on the median prices of existing single-family homes, which fell 2.2 percent in the metro area and 2.5 percent nationally year-over- year for September. There were 31,450 unsold properties in the metro Denver market in September, compared with 27,248 a year earlier.”
“For the past five years, home prices haven’t appreciated in a ‘foreclosure belt’ stretching from Weld to Adams to Arapahoe County, said Lou Barnes, a mortgage banker in Boulder. Overbuilding has dampened price appreciation, which has contributed to high foreclosures in those areas because homeowners have less equity and aren’t able to sell quickly, Barnes said.”
“Economist Patricia Silverstein links the genesis of the current foreclosure cycle to the loss of 61,200 metro-area jobs in 2002 and 2003. Many workers had difficulty replacing the incomes they lost in the downturn and appear to have turned to higher-risk mortgage products such as no-money-down and adjustable-rate loans to stretch their finances.”
“Broker Phil Heter, whose company only sells foreclosed homes on behalf of lenders and Fannie Mae, said that while there are huge differences between now and 1989, there appears to be no end to the number of foreclosed homes hitting the Denver-area market.”
“‘We were busy before, but it was like they just opened the faucet wide open 90 days ago,’ Heter said.”
Haven’t there been reports of cash-back deals in San Francisco? The first Denver Post link includes a good bit of detail on these frauds.
‘Colorado’s new foreclosure hotline received 3,000 calls during its first two weeks, more than similar efforts in other states, organizers said Monday. Kait Thompson said she has spoken to several mothers who called on behalf of their adult children who are in trouble with their mortgages. Others have concerns about their exotic mortgages.’
‘Most stories we’ve heard are that they’re in some sort of mortgage where it’s an option ARM (adjustable-rate mortgage) or interest-only and they can’t afford to continue to make the payments, and they want to know if they can refinance,’ she said.’
‘The Colorado attorney general’s office will subpoena at least 10 area mortgage brokers and companies during the next few weeks in an investigation of possibly deceptive advertising practices, a prosecutor in the office said. The office is focusing on mortgage companies that advertise low teaser interest rates, tout minimum-loan-payment plans and use confusing terms to describe their loans, said Jan Zavislan, deputy attorney general for consumer protection.’
‘At least one unidentified appraiser who allegedly overvalued homes in the Pueblo area is among several under investigation by the Colorado Real Estate Commission.’
‘Erin Toll, the new commission director, recently detailed specifics of the ongoing investigation of ‘the most egregious cases’ of appraisers she alleges knowingly overvalued homes by as much as hundreds of thousands of dollars, sometimes leading to foreclosures.’
I believe these cash back deals are more prevalent than most people realize, and contribute to a big chunk of the inflation in housing prices (not just CA either, but on a national level). This has to be stopped.
Do you think they’ll get caught or is there little if any paper trail?
There has to be a paper trail. For starters, the cash back was a check. For an auditor to sign off as “clean,” the refunds would have to have been categorized seperately in the daily books and on the financials, or at least footnoted therein. The information is all there, somewhere. Depends solely on the determination (and authority) of the seeker how quickly it rises to the surface.
Builder incentives are a variation on this theme, where valuable goods (e.g. new cars) are financed as part of the home’s purchase price instead of cash back to the buyer.
That’s inflation allright. Increase in money supply (in the form of bank credit….regardless of whether fraudulent or not) chasing the homes.
Colorado is the quintessential bubble market.
No, it’s different here. My realtor said so.
Colorado has had no bubble. The article says there has been no price appreciation for several years in many metro Denver areas. This article is about people who can’t afford cheap homes buying them with risky loans. I wish it were true, but the real estate bubble passed Colorado by. But not unscrupulous mortgage lenders.
Same thing in Dallas with same non-American scammers doing the same thing.
Colorado certainly has a bubble, it just peaked much earlier than other markets. There was a huge run up in the late 90’s and then it started slowing around 2003 when other places were still appreciating. Given economic conditions, the market really should have crashed in 2003-04, but exotic mortgages kept things floating along until the inevitable happened.
I haven’t read about cash back deals in SF proper. I’m sure exotics mortgages are the rule for purchases since 2000. Those unaffordable loans could create lender fraud as owners seek to postpone judgement day by refinancing with kickbacks.
IMHO fruad is more likely to happen with hyper-inflated McMansions built on cheap land. More room for profit, fewer buyers and agents.
Sure. I commented earlier in the week about seemingly every builder piling into that ultra high priced sector for which there seems to be little market. They stick the same cheap windows and faucets in those, just mark them up about 10x more.
“Two years ago, Colorado issued a warrant to arrest Taiwan Lee, a state prisoner who had vanished on parole. He hadn’t gone far. While police looked for him, he bought three houses at inflated prices in Arapahoe County with the help of lenders who put up the entire $1.9 million. After he was caught and jailed, he managed to buy two more. Until the foreclosures commenced, Lee owned five villas in an affluent gated community while living behind prison bars 150 miles away.”
Can any of the lending industry insiders who read and post here comment on whether this borrower is typical of those whose loan applications are getting approved these days?
This nauseates me.
This nauseates me.
At least the homeless guy who bought 5, could sleep in one of his own beds.
But maybe Taiwan could have used his “cell” phone to stay in touch with a buddy who managed them as rentals?
The ACLU will guarantee him the right to be a ‘convict filpper.’
Kinda gives a new meaning for ‘gated community”!!!
Many FBs will be living in the same gated communities!
Gated and locked!
“could have used his “cell” phone”
LOL
No one should have been giving this person the huge loans required to pull this off. This is a matter of lenders and regulators being asleep at the wheel. Liberty and fraud are totally different things, so the ACLU angle seems like another case of how we all need to remember to keep the math turned up and the pre election politics filtered out unless there is something truly relevant.
Yesterday i posted about some one in mortgage industry…. that I talked to.
One thing I forgot.. He knows a broker who has his own co and does origination onbehalf other companies also. he is in bay area.
that person is getting threatening calls/people are coming to his home. these are his customers whom he put in option ARM or some exotic mortgage and they lost their homes. He is very much afraid of thes things. My friend asked him innocently ” did you explain to these people the negative aspects of these loans before signing them up?” ans was in the negative…
my friend says this could be tip of the iceberg and many more such stories will become common in the coming days..
As distasteful as some might find, pointing out this fact, it remains a fact.
This bust won’t be in full swing until a number of mortgage broker stabbed 113 times crimes and stories are told.
Your friend just looks like he is leading the way.
Invest in security.
just a clarification. Mortgage broker getting threateing calls is my friend’s business acquaintance.
Put me on the jury. ‘Foreman, do you have a verdict? We do your honor. NOT GUILTY.
He is very much afraid of thes things.
Best get his sorry azz down to his local sheriff’s dept. for a concealed gun permit.
Better than that-he needs to go disappear somewhere in North Dakota.
Live by the sword-die by the sword.
“Critics say mortgage companies have little incentive to ferret out inflated sales because they bundle and resell their home loans to Wall Street investors, taking their profits and diluting fraud losses in large pools of mortgage-backed bonds. These securities get ’sold in little pieces all over the world,’ said Lou Barnes, a Colorado mortgage bank owner. ‘It makes it very difficult to figure out who, if anyone, bears any responsibility for the flow of Colorado’s foreclosures.’”
It makes it very difficult to figure out who is the ultimate bagholder, too.
Perhaps difficult? They might start with the person signing the loan docs and the loan officer charged with due diligence of the applicant and sale.
Not that tough. You try to draw funds from a bank where you had money and it comes back in error. You find out your bank is bankrupt. You just found out who the bagholder was/is.
The FDIC / US taxpayer? (At least on deposits up to $100K).
And a moderately paranoid person would say that’s the reason that they stopped reporting M3. So that when the foreclosure wave crests, and the FDIC is taking over banks left and right, nobody will be able to see how much wealth goes “poof!”
One thing is for sure. When this is all over and the court cases have abated, there must be more regulations put in place. An obvious place to start is with chargebacks to the originating lenders if their mortgage fails to perform.
Wait one damn minute! You say the word “regulation” and a lot of Republicans on this board are going to get mad at you.
Regulation is never required, regardless of how friggin obvious it is needed.
Nah, the wingnuts will argue that all of this is the result of too much regulation.
Did it occur to any of you that FRAUD is already illegal? Maybe your beloved beaurocrats need to get off their fannies and enforce existing laws?
Yes…… Of course you are right. The regulators are likely corrupted anyway!
Fine, still charge back the loan to the originator and let the market fix it’s self!
“‘It clearly is a problem,’ said Colorado Attorney General John Suthers. ‘We have been looking at house purchases over cost and money going back to the buyers.’ Suthers’ consumer protection chief, Jan Zavislan, said the office is investigating various participants in inflated sales, including buyers, sellers, appraisers, mortgage brokers, real estate agents and title companies.”‘
This points to another advantage of renting in CO: You don’t have to worry about getting dragged into the AG’s fraud investigation (sounds like everyone else does, though…).
“What’s happening, Silverstein said, is a longer lag between the negative job-loss news and the foreclosures, when compared with Denver’s problems in the 1980s. During the last great foreclosure boom, it was roughly two years between Colorado’s job losses and its high foreclosures, Silverstein said. Colorado’s recent job- loss peak, in 2002 and 2003, is now three to four years in the past. ‘Given the severity of it and the slow growth since then, we’ve had a longer lag,’ she said.”
She mistakenly assumes that labor market weakness is a necessary condition for a rise in foreclosures, a soon-to-be discredited belief among many economists.
“Economist Patricia Silverstein links the genesis of the current foreclosure cycle to the loss of 61,200 metro-area jobs in 2002 and 2003. Many workers had difficulty replacing the incomes they lost in the downturn and appear to have turned to higher-risk mortgage products such as no-money-down and adjustable-rate loans to stretch their finances.”
She might have a valid point here. But things could not have played out the way they currently are without a complete abandonment of lending standards. Normally, a recent job loss makes it rather difficult to qualify for a home loan.
Foreclosures because of job losses? That’s SO old economy. Now people go into foreclosure not because of an unfortunate event, but because they got a mortgage that they were never going to affort to pay off in the first place.
“New Century grew concerned enough about fraud to install a new screening technology early this year, he said. As a result, ‘we have stopped close to $1 billion in loans.’”
Whoop-te-do…a little bit too late to the party, ain’t ya, Bub?
As soon as the volume of bad loans really snowballs, Lowenthal will simply close the doors of his “LLC” and it’s off to his villa in the Cayman Islands.
The money’s already been looted from the idiot MSB buyer’s.
Do you mean “MBS buyers?” Like, say, lots of pension fund managers?
GS-
RE: Idiot MSB buyers
I’m far from a finance guy, but once this boom picked up a head of steam with all of it’s toxic loans/0% down crap, appraisal fraud, flipping, etc., what level of awareness does it take to say, as somebody responsible for another’s money to say-I’m not gonna be part of this.
This bubble has the prints of the ‘90/’01 bust written all over it-only it’s infinitely worse.
You had to be virtually brain-dead not to know what was coming.
Just more caught up in the greed for returns.
“But ‘the investor has the right to demand we repurchase the loan if there is fraud involved,’ he said. ‘We’re at risk. We do have an interestin keeping fraud down.’”
Ok, so some guy from Indionesia or India demands. A month goes by and nothing happens.
So he/she demands again, and another month goes by.
So he/she demands again, and another month goes by.
So he/she…
America’s version of the “reverse Nigerian fraud,” this time it is the rich country sticking it to the poor countries.
“New Century grew concerned enough about fraud to install a new screening technology early this year, he said. As a result, ‘we have stopped close to $1 billion in loans.’”
They have finally tightened up their credit. Now crooks in jail can no longer borrow millions from them. ‘Bout time.
- “Despite solid growth in jobs,
- incomes
- and population,
metro Denver’s foreclosure rate is on track to hit 1.7 percent of all homes this year, according to an analysis.
Gee, I did not know that Denver was such a ‘Power House’ of job growth and INCOME! WTF!
Just a rookie observation from So Cal, but we’re supposed to lead the way for economic growth, income, wages blah blah. I just don’t see that happening here and the word on the street doesn’t support great wage increases.
I’m not aware that the Denver area has has “solid” job and income growth. What does this mean? It’s the first I’ve ever heard of it. And frankly, based upon what I see around here, it’s far from true.
Which state is next? I think FL or Az will soon pass Co as the next great state of forecloures.
Phoenix and Las Vegas will be interesting to watch…
Really any area where properties rose substantially beyond affordibility will be trouble areas - Wait that is ALL of California.
But wait, experts tell us that foreclosures or affordability will have little effect on market conditions and we should not expect prices to drop much.
Never in the history of this country has it been a better time to be a criminal and parasite, or a worse time to be an honest, hard working citizen.
They take their cue straight from the top.
During the last 5 year period, there has been an incredible amount of fraud in the real estate market. Attorney Generals in several states are now turning their political eagle eyes on these practises. Why? Because they are looking out for Joe Sixpack? No. It’s because it’s a good opportunity for them to paint themselves as a crusading “Champion of the People.”
A VERY large percentage of those involved in the appraisal, mortgage and real estate broker business have cooked the books just as much as the Enron executives cooked the books. A lot of these mortgages, which were based on inflated appraisals, have been passed on (sold) to all kinds of investors in bundles. The crap from that fallout has not started to gather much momentum - yet. Once it does, as property values sink into the basement and these lenders get stuck with fraudulent mortgages, there will be enough ambulance chasing lawyers going after these fraud cases to account for several years of lawyers graduating law schools. Besides the ambulance chasers, there will be the heavy hitter lawyers who will be retained by the mutal funds and pension funds who also bought these bundled toxic loan packages. Not doubt foreign buyers of these toxic mortgage bundles will also figure in there somewhere.
Once the ball starts rolling a lot of mortgage brokers, appraisers and real estate brokers are going to get toasted.
I’m not sure where Freddie Mac and Fannie Mae are going to figure in all of this. Obviously, the executives of those companies, have lined their pockets (to say the least) with stock options, etc, as they turned a blind eye to what was taking place. Not sure how the Fannie Mae and Freddie Mac will all turn out. Housing is now a BIG part of the bankrupt US financial system. Somehow (don’t ask me how) Washington will do all it can to stop any heavy duty scandals hitting the headlines. So far, with Fannie Mae and Freddie Mac, they seemed to have been able to “hush up” much of what has been going on there.
A lot of people do not understand that Freddie Mac and Fannie Mae are NOT part of the Federal government. They have a “government charter” but there is no wording within that charter which guarantees that the Federal government will bail out these two companies if they get into trouble. If they did have to bail them out, it would mean the destruction of the US financial system…..so it seems the best policy (for the government) is to play any crisis down and hope it goes away. Of course, if the property market continues to fall and we do hit a recession…..it will be the fault of the democrats if they get in on Nov 6th (lol).
“Critics say mortgage companies have little incentive to ferret out inflated sales because they bundle and resell their home loans to Wall Street investors, taking their profits and diluting fraud losses in large pools of mortgage-backed……. During the last 5 year period, there has been an incredible amount of fraud in the real estate market”
There appears to be more and more reported cases of overappraisal/kickbacks to buyer, and other types of RE Fraud. is This more widespread than is reported? Judging by the rediculous prices ($400-$500,000)buyers are paying to purchase POS houses in the nastiest deteriorating barrio’s of inner LA, i wonder if this type of RE fraudulent activity(more like a racket) is going on in LA, which has always been the fraud capital of the U.S.
If the entire RE chain process(Agents, brokers lenders, appraisers,title companies), and on up are involved, then it looks more like an out and out fraud racket similar to an auto accident/workmans comp/Medicaid fraud ring which would involve mulitple cooperating parties, from ‘cappers’ to doctors to lawyers.
“Critics say mortgage companies have little incentive to ferret out inflated sales because they bundle and resell their home loans to Wall Street investors, taking their profits and diluting fraud losses in large pools of mortgage-backed bonds.”
This is more of a national problem then just Colorodo. From Maine, Florida to California….Just read this…
http://appraiserspetition.com/
The concern of this petition has to do with our “independent judgment” in performing real estate appraisals. We, the undersigned, represent a large number of licensed and certified real estate appraisers in the United States, who seek your assistance in solving a problem facing us on a daily basis. Lenders (meaning any and all of the following: banks, savings and loans, mortgage brokers, credit unions and loan officers in general; not to mention real estate agents) have individuals within their ranks, who, as a normal course of business, apply pressure on appraisers to hit or exceed a predetermined value.
This pressure comes in many forms and includes the following:
the withholding of business if we refuse to inflate values,
the withholding of business if we refuse to guarantee a predetermined value,
the withholding of business if we refuse to ignore deficiencies in the property,
refusing to pay for an appraisal that does not give them what they want,
black listing honest appraisers in order to use “rubber stamp” appraisers, etc.
And people thought I was being hard on realtors when I said that many realtors helped with the false run up on appraisals and referred buyers to mortgage brokers who would approve a unqualified person .
My $0.02:
It’s interesting that the housing market drove/increased inflation and the consequential increase in the fed funds rate, which caused the ARMs to reset/increase and soured the broad economy that was primarily led by the housing industry.
Interesting.
I think we’ll see the FF rate stay at 5 1/4% for a bit, as this is the only thing holding together the fragile US economy. Only when other countries raise their lending rates will the US need to follow suit in order to keep their debt instruments desirable in the US’s otherwise fiscal crash and burn.
Ready to flag? Casey has his Craigslist ad up again for the Dallas house while he’s also offering it as part of the package on the other site. He’s a piece of work. Ya’ll flag this ad so it goes down, ok?
http://dallas.craigslist.org/rfs/227314977.html
Done
Done
Done
i also flagged casey and his fraudulent posts on CLs.
Young Casey is a good arguement for “work houses” ala Scrooge. I’d like to see the lazy little twerp arrested for fraud and then given the choice of PMITA prison or a tour in the army.
This Casy was getting money from the sellers when he bought the houses . Now the realtors involved with that listing and the seller had to go along with inflating the appraisal to give Casey cash out of escrow . In fact ,in one of the articles I think Casy admitted he got money out of buying the home by inflating the appraisal .
It’s all fraud and there are more people than just Casey involved who should be arrested .