January 21, 2007

“House Of Cards” Will Collapse On Speculators: Arizona

A housing report from the Arizona Republic. “A wave of mortgage fraud is rippling through pockets of the Valley, inflating home values through scams called cash-back deals. Left unchecked, cash-back deals cost homeowners and lenders millions of dollars and could erode confidence and values in Arizona’s real estate market.”

“‘Mortgage fraud in the Valley has become so prevalent people think it’s a normal business practice,’ said Amy Swaney, a mortgage banker and past president of the Arizona Mortgage Lenders Association.”

“Under federal law it is illegal to misrepresent the value of a home to a lender. Everyone who is a party to the deal is subject to prosecution.”

“At a recent Valley real estate meeting with 1,000 agents, mortgage brokers and escrow people, a speaker asked people in the audience if they knew of any cash-back deals in the Valley. All but a handful raised their hands. Many seemed surprised when told such deals are illegal.”

“Last November, a cash-back buyer approached Brett Barry of Realty Executives at an open house in north Phoenix. The home had been reduced to $500,000. The potential buyer said he would pay full price but wanted to raise the sales price $40,000 or $50,000 and have the seller write him a check for that extra amount.”

“‘He wanted the money under the table after the deal closed,’ Barry said. ‘He said he had a lender with an appraiser who could ‘make the deal happen.’ Barry knew the deal was bad but was obligated to present it to his clients, who also thought it was too fishy and passed.”

“Cash-back deals are so common that a variety of Web sites openly promote them. Postings on the popular craigslist.com include individuals trying to sell homes by offering cash-back deals. ‘Anyone in the real estate business who doesn’t know these deals are illegal should get out of it,’ said Margie O’Campo de Castillo of Arizona Dream Realty. ‘These kind of bad deals will hurt everyone in the industry and the housing market.’”

“The Republic investigation found neighborhoods in Gilbert, Queen Creek, Mesa, Laveen and Surprise where speculators bought groups of homes at prices significantly above asking prices and neighborhood comps: a sign regulators consider a strong indicator of cash-back deals.”

“The Republic found one new neighborhood where a group of buyers has been selling and reselling homes to one another. According to public records, members of this group paid higher than asking prices using high-interest and adjustable-rate mortgages. They own almost 25 percent of the houses in that neighborhood.”

“Tom Ruff is a real estate property record expert. At the Republic’s request, he also analyzed the property records that suggest an ongoing cash-back scheme in the new neighborhood studied by the Republic. He called what he saw ‘a house of cards’ that will soon collapse on the speculators but end up hurting other homeowners more.”

“The extent of the damage from such deals is uncertain because the state task force investigation is just starting, but some believe it is Valley-wide. ‘The scams have created false appreciation for the Valley’s real estate market,’ said Diane Drain, a Phoenix real estate attorney who specializes in foreclosure cases.”

“Valley housing-market experts now believe home values are inflated anywhere from 10 to 40 percent. The recent drop in home values, about 5 percent in 2006, is part of a market correction. Ironically, cash-back deals that inflate sales prices may have cushioned the fall so far. But as those bad loans come due, they will contribute to the drop.”

“Calls about cash-back deals began reaching examiners at the Department of Financial Institutions and Swaney at the Arizona Mortgage Lenders Association in late summer and fall of 2006. The calls were from homeowners, real estate agents and lenders asking if the cash-back deals were legal. The number of calls has increased every month.”

“Rotellini of the Arizona Department of Financial Institutions said her agency now receives calls every day on cash-back deals.”

“In 2005, loose lending standards helped the mortgage industry post record profits and struggling buyers purchase a record number of homes, (and) also helped speculators and scam artists snap up Valley homes. The hyperdemand created by speculators played a major role in the rapid rise of Valley home values.”

“According to mortgage giant Freddie Mac, at least 35 percent of all homes sold in metro Phoenix during 2005 went to speculators and investors. Investors accounted for more than 20 percent of Valley home sales last year.”

“As the hot housing market cooled in 2006, business fell for everyone in the real estate industry, including appraisers and real estate agents. Some started looking for new ways to make money. Cash-back deals became a way to keep commissions and fees coming in.”

“Less than a decade ago, home buyers had to put at least 10 percent down on a mortgage, show all types of proof of income and even how they earned the money for the down payment. Now, buyers are getting into houses for nothing down and with little proof of income.”

“But the many easy-to-get, adjustable-rate loans available also have opened the door for the housing market’s downfall. Now, their interest rates and payments are climbing, while their incomes aren’t.”

“‘Adjustable-rate mortgages work for some people who understand them, but there are Valley homeowners who don’t and now are on the verge of losing their home,’ said Jay Luber, vice president of First Horizon Home Loans of Phoenix.”

“Like regular buyers, speculators and housing scam artists are having trouble making their payments as interest rates on their loans rise. And finding a buyer to pay the inflated price they need to cover their loans is getting tougher. The number of homeowners with multiple Valley properties falling into foreclosure also is now rising, according to property records.”




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188 Comments »

Comment by Ben Jones
2007-01-21 07:16:49

Way to get out ahead of the story, AR. Only two or three years past when it could have made a difference!

Suppose the developers are concerned?

‘Commercial activity should remain strong, even as the market begins to normalize, said Mike Coover, research and marketing manager for the firm. ‘I don’t think even the housing correction will be significant enough to adjust (developers’) business plans,’ he said. ‘2005 was a banner year for all types of real estate,’ with many investors new to the game jumping in, local commercial developer Michael Pollack said. If you didn’t make any major mistakes, ‘you could do no wrong pretty much,’ he said.’

‘A swath of Chandler land is in for a dramatic change in the coming years as developers transform its agricultural landscape into more than 1,400 homes. Homes will range from 2,700 square feet to 6,500 square feet, running in cost from $600,000 to more than $1 million, Tice said.’

Comment by txchick57
2007-01-21 07:50:56

Again, nobody cares while “everyone” is benefitting, just like nobody cares that Corvis IPO’d in 2000 with a higher market cap than GM as a “pre-revenue” company. They start to care after people have lost their shirts.

Good old Queen Creek. That place will end up as a trashy ghetto eventually.

Comment by geeah
2007-01-21 08:00:18

Corvis? Fiber Optics? I shuddered with past-life experiences… i wonder if we’ll end up with a glut of “dark-housing” much like the dark networks we’ve still got with fiber optics… BROADBAND HOUSING!

Comment by Vmaxer
2007-01-21 08:16:31

geeah,

You get credit for coining the term “Dark housing”. With the recent surge in the number of listings of empty houses, the term should become popular this year. Spread the “word” everyone. Buzzwords make for good sound bites.

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Comment by geeah
2007-01-21 08:22:44

Dark-Housing ™. Patent forms being filled out now.

 
Comment by txchick57
2007-01-21 08:24:39

get the domain name too

 
Comment by geeah
2007-01-21 08:44:06

sweeeeet! i can get some hungry venture capitalists, throw together a business plan, incorporate, start talking about the New Housing Economy (Old Rules Don’t Apply Here).. get one or two shots on CNBC… write myself a hefty option-only deal… roll this puppy out in an IPO this spring… watch out Google! Who wants in? Ground-level opportunity.

 
Comment by geeah
2007-01-21 10:21:20

i’m going to be rich! RICH! RICH! sadly I did pick up the domain. I just threw up a multi-user blog community. If you’re interesting in starting your own housing blog, stop by and grab one @ http://www.darkhousing.com … I can’t offer stock options, just yet.. but if you ever need a place to continue a rant.. start up your own blog.

 
Comment by Hal F. Wit
2007-01-21 11:20:07

Thanks. I grabbed one. I’ve got some ideas.

 
Comment by fiat lux
2007-01-21 11:47:12

Awesome domain name.

 
 
 
Comment by Lisa
2007-01-21 08:55:05

“Again, nobody cares while “everyone” is benefitting…”

Exactly. Same thing with the Dot.com bust. No one cared that Travelocity’s market cap was more than the major airlines combined.

Once the music stops and people can’t find a chair, that’s when the 20/20 hindsight kicks in. Disgusting.

 
Comment by talon
2007-01-21 09:21:00

“Good old Queen Creek. That place will end up as a trashy ghetto eventually”

It won’t have far to go.

 
Comment by imploder
2007-01-21 11:46:07

“They own almost 25 percent of the houses in that neighborhood.”

Astounding number. 25% skewed the comps dramatically.

75% of the neighborhood is scr&wed!

Fraud is the new official post office poster boy. Arizona has found it’s “reason” that everybody’s house is soon gonna be worth 60% less. It wasn’t public wide greed and stupidly reckless lending standards, it was a few bad apples that ruined the market. Now they can report on the slaughter without “insulting” their readers. The bad guys did it.

What ever, as long as it “gets reported”. The flood gates have opened… and it’s looking very bad.

 
 
Comment by txchick57
2007-01-21 07:52:34

‘A swath of Chandler land is in for a dramatic change in the coming years as developers transform its agricultural landscape into more than 1,400 homes. Homes will range from 2,700 square feet to 6,500 square feet, running in cost from $600,000 to more than $1 million, Tice said.’

I wouldn’t plow that corn under just yet. I’ll bet you $1 that it will still be there ten years from now. Right now, corn is a way better investment than housing.

Comment by Mo Money
2007-01-21 08:21:11

And meanwhile the job market only supports housing in the $140-220K Range. If I was retiring to the area I sure wouldn’t be spending $600,000 ti $1 Million either.

Comment by Jerry from Richardson
2007-01-21 09:35:28

Pay $1 million to live in the desert? Maybe they’re running out of sand.

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Comment by Farm ECON
2007-01-21 11:18:55

There is an ethanol ‘bubble’ too…look at the growing capacity.

Comment by Karl Dahlquist
2007-01-21 12:26:14

The WSJ says ethanol makes money at $50/barrel for oil…..didnt oil just drop below that? At the same time all those plants are coming online?

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Comment by AE Newman
2007-01-21 12:27:20

posted “There is an ethanol ‘bubble’ too…look at the growing capacity.”

You can thank Gary Watts and his RE turd pals for that. The more they flap their lips, the more free gas!

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Comment by NoVa RE Supernova
2007-01-21 13:24:50

http://www.larouchepub.com/other/2006/3322_ethanol_madness.html

Ethanol isn’t just a bubble, it’s a massive flim-flam racket.

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Comment by Marc Authier
2007-01-21 17:39:38

Yes that one will very funny because it was backed in large part by these stupid politicians. The ethanol thing is a joke. It does not even make sense on a energetic basis. Another American joke!

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Comment by Jay_Huhman
2007-01-22 06:21:51

Almost no corn in Arizona. Probably durum or barley.

 
 
Comment by crispy&cole
2007-01-21 08:46:28

How many puff pieces has this “reporter”/ cheerleader Reager written in the last few years? Now she is jumping on the bandwagon to earn a pulitzer…

Comment by belchorama
2007-01-21 10:12:10

Dude. No kidding, what a total hack. Apparently she’s going to try to excuse her incompetence by acting as though this one aspect of the bubble - cash-back at closing - was the only driver behind the bubble. It’s not just her that has been incompetent though. The mainstream media has almost uniformly demonstrated their incompetence during this run-up. It wasn’t until late last year, about a year after we had passed the national peak, that the mainstream media FINALLY started reporting what everyone reading this blog knew for years prior. A$$holes.

Comment by watching in Reno
2007-01-21 11:25:00

But this concept can’t just be familiar to Arizona. I’d love to find out how much of this “cash-back” crap has occurred around Reno, Nevada. I’m sure it’s happened in LV.

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Comment by BanteringBear
2007-01-21 11:50:20

Plenty of fraud in Reno. I have been compiling a list of recent sales which reek of mortgage fraud, selling for several $100k above recent comps.

 
 
 
 
 
Comment by BPLI
2007-01-21 07:50:51

If you look at the bottom right of the article in Ben’s link, the reporter appears to be all over it asking reader’s to email her with fraud suspicions. This thing is going to mushroom. How long till congress jumps in? 25% of some neighborhoods is phenomenal.

Comment by Sunsetbeachguy
2007-01-21 07:54:47

I will state my point again.

I think, the reporter was lurking here and noticed Paladin’s heroic efforts in Sacramento.

Ben, any confirmation on HBB hits from the AZ Republic.

Paladin: Hurry and get your fraud reporting website up since the MSM is trying to beat you to the punch.

 
 
Comment by BPLI
2007-01-21 07:59:05

Good point, probably did catch Paladin’s posts. The lawsuits will be completely out of control with this. I think the original lender will be the ones getting slaughtered in court. If we could see which lenders end up being in the highest % of these deals it would be fascinating.

Comment by Paladin
2007-01-21 11:44:01

Don’t forget the homebuilders who are using this technique to bail themselves out of houses they cannot sell any other way. The existing nieghbors are going to be all over a class action filing, since many home builders have lots of assets to go after. Hell, some of them have homes worth $10,000,000! Just enough to cover the legal fees….and the class action memeber homeowners will get coupons for 20% their next home!!!

 
 
Comment by Bill in Phoenix
2007-01-21 08:01:22

“Valley housing-market experts now believe home values are inflated anywhere from 10 to 40 percent. The recent drop in home values, about 5 percent in 2006, is part of a market correction. Ironically, cash-back deals that inflate sales prices may have cushioned the fall so far. But as those bad loans come due, they will contribute to the drop.”

If these “experts” are RE industry types, then you know for sure the houses are not 10 to 40% overinflated, but probably 40 to 60% overinflated.

Great article, and in the AZ Republic! The mainstream media, now finally letting the truth out, is going to make the public more and more skeptical (and should do so). This is going to make for deeper annual price cuts in Phoenix than the 5% of 2006.

Comment by Ben Jones
2007-01-21 08:07:16

Remember how the AZ ‘experts’ scoffed at numbers like 40% last year? And pointing out that half of subdivisions were unoccuppied was met with blank stairs?

Truth is, nobody really has any idea how overpriced some AZ markets are, but given how much they grew and how quickly, it could be more than 40%. Especially where the overbuilding has occurred (almost everywhere).

For you AZ folks, do what I did. Sit down with an appraiser you know and do a little digging. You will find just how ‘prevalent’ this stuff has become.

Comment by palmetto
2007-01-21 08:42:47

What I want to know is, will an “amnesty” be issued to all the folks who participated in the illegal activity, since it is so widespread and ingrained? After all, that seems to be the climate of the times. If breaking certain laws is so widespread and so many profit from it, just issue an amnesty. Maybe we’ll see huge demonstrations in the spring, throughout the streets of all the bubble cities, with realtors, appraisers, lenders, bankers, builders, developers etc. clogging the streets and waving flags bearing the logos of their organizations. Maybe their children can get the day off from school to join their parents and support the right to screw others. They can “demand their rights” to act in a criminal fashion, supported in the background by the money men who profit. Those of us who believe in following the law and dealing with others in a fair and aboveboard fashion and insisting that others do the same will be accused of hate speech and hate crimes. The ACLU will defend the aggrieved members of the
REIC.

Comment by John Law
2007-01-21 09:08:23

” The ACLU will defend the aggrieved members of the
REIC.”

no they won’t. there isn’t a reason to defend them.

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Comment by palmetto
2007-01-21 09:11:08

Yes, there is. The ACLU will defend them against hate speech and also because the REIC is just a bunch of folks working, and working is not a crime.

 
Comment by JTZ
2007-01-21 09:36:21

No the ACLU will not defened them. There isn’t any civil liberty at stake.

 
Comment by spike66
2007-01-21 09:39:39

Palmetto,
love your post, but agree with John Law, the ACLU would have nothing to do with this.

 
Comment by palmetto
2007-01-21 09:44:44

I wrote the above tongue in cheek, with sarcasm. And I will answer in kind. Yes, there are civil liberties at stake here. The REIC must be defended from the hate speech that has infected these various bubble blogs. And again, all involved in the REIC are just folks trying to earn a buck. Their civil liberties are being violated by exposing the fraud, so they must be defended. The ACLU should come to their aid.

 
Comment by palmetto
2007-01-21 09:51:18

Why wouldn’t the ACLU defend them? The members of the REIC should have a right to ply their trade free from hate speech and harrassment. They are only trying to feed their families.

 
Comment by cactus
2007-01-21 10:56:53

If anything the Government will inflate us out of the bubble. Then the savers loss right along with the borrowers mitigating the loss.
Most savers being Asian countries and a few out of date Americans.

 
Comment by crisrose
2007-01-21 13:47:34

You can not inflate out of debt with more debt inflation. The debt does not go away, you just add to it. Debt inflation only works until you reach the end of the line and any additional debt can not be serviced - uh, like now.

For example, $500k house will not rent to cover the costs. $500k house can be rented for $1000 per month. Why buy? Why buy when you can only afford $1000 per month and the i/o teaser rate mortgage only lasts for 12 months and then you’re foreclosed?

The only solution and what happens at the end of the line regardless - the one that is gunning and chomping at the bit - is debt deflation.

 
 
Comment by Bill in Phoenix
2007-01-21 09:20:56

Palmetto, you are probably right. Crime is okay if the majority practice it. Another reason to buy PMs and ammo. There could be blood in the streets and “Balkan”-izing in the U.S. for awhile. The minority few are honest people.

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Comment by Jerry from Richardson
2007-01-21 10:45:17

The illegal aliens are about to get amnesty so it worked for them. I think the REIC members would get away with it as long as not too many white males show up at the demonstrations. They need to gather women and minorities and their children. Then it will become a racial and gender issue and the government will have to cave.

Amnesty for the REIC

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Comment by palmetto
2007-01-21 11:22:10

Absolutely. Just break the law and do it in such volume, with total “in your face” disregard, get others to do it, laugh at those who obey the law (and victimize them and leech off them) and voila! You are a downtrodden hero-victim and deserve amnesty.

 
 
Comment by watching in Reno
2007-01-21 11:29:39

this makes me remember a woman who hung herself up in Elko County, Nevada a few years ago. She was in charge of USDA rural business loans. She did the same cash-back scheme only the borrower (who had weak credit) had to let her skim about $20,000. give or take off the top of their low-interest government backed loan and the borrower had to make the payment on it. She got caught and was prosecuted and later found hanging from the rafters of her husband’s family black angus/hereford barn in the sleepy little town of Lamoille.

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Comment by Mike a.k.a/Sage
2007-01-21 18:45:35

Why doesn’t the ACLU defend the burglars and robbers now in prison. They were just trying to get money and food to feed their families.

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Comment by Catherine
2007-01-21 09:03:46

Kinda reminds me of meeting an appraiser at a property. He walked around outside, then got ready to go. I asked, “aren’t you going inside???” And he answers, “I already spoke to the lender”.
The situation is way, way, way under reported.
And it’s way more than 40%, Ben, I believe. Way.

Comment by fred hooper
2007-01-21 09:20:17

I’m on record at 60% over a year ago, and as high as 80% if a concurrent meltdown in the US stock market and global markets should occur. (Me-former valley expert-called the bubble in 2000, “only” 5 years too early). Arizona is toast, but the implications of a US stock real estate crash bring a systemic financial crisis into play. Watch the price of gold.

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Comment by fred hooper
2007-01-21 09:22:36

/i> On the fraud stuff, I wonder if the FBI could sieze the MLS records and start looking at listings that were withdrawn, relisted at a higher price, then sold. Seems like a no-brainer place to start.

 
Comment by fred hooper
2007-01-21 09:23:35

i/> sheesh

 
Comment by fred hooper
2007-01-21 09:25:52

double sheesh.

 
Comment by mjh
2007-01-21 11:36:25

I like the idea of siezing the MLS records. A perl script would find all those fraud cases in no time.

 
Comment by Misstrial
2007-01-21 14:17:12

The FBI investigated 11,000 (eleven thousand) individuals in the Southern California area alone back in 1990-5. Between three and four thousand convictions resulted. If they did it then, they can do it now.

~Misstrial

 
 
Comment by robin
2007-01-21 19:19:00

Come to think of it, on my last appraisal for a refi, the guy just came out and taped off the house. No inside look around, either!

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Comment by jack the cat
2007-01-21 10:23:16

Go here:

http://www.ofheo.gov/HPIState.asp

Select “Arizona”. Click “Search”.

At a glance, 40% might be conservative.

 
 
Comment by implosion
2007-01-21 08:50:36

“now believe”? What is this, a step function phenomenon?

Comment by bradthemod
2007-01-21 09:57:53

It is a delta singularity.

 
 
 
Comment by Mozo Maz
2007-01-21 08:12:13

“The Republic investigation found neighborhoods in Gilbert, Queen Creek, Mesa, Laveen and Surprise where speculators bought groups of homes at prices significantly above asking prices and neighborhood comps”

Uhhh. The Republic did? Or the bloggers did? :)

Comment by fiat lux
2007-01-21 11:51:45

Isn’t Casey Serin’s alma mater ‘Nouveau Riche University’ located down there too? I wonder if their teams of student-investors are in on this.

 
 
Comment by Jayman
2007-01-21 08:12:23

Q:How can I tell if a home is overvalued???
A:If it is in the Arizona Republic reporting area it is!!

 
Comment by Mo Money
2007-01-21 08:13:38

“‘He wanted the money under the table after the deal closed,’ Barry said. ‘He said he had a lender with an appraiser who could ‘make the deal happen.’

Yup, this is exactly what “American Investors Group” is teaching, you find the deals and we’ll find the financing for you. “Seminars” scheduled for future felons in the bay area now.

 
Comment by miamirenter
2007-01-21 08:13:52

as flippers are bleeding w/ houses that are not selling, renting places have started to give deals once again..miami saw 20% gain in rents but now i see deals offering 15% off. Rents are soft and we haven’t seen construction lay offs yet..

 
Comment by rudekarl
2007-01-21 08:15:37

All I can say is: OUCH! Sometimes I feel as if a couple hundred thousand Russian mobsters dropped in, settled throughout the country, and set up shop committing fraudulent RE transactions. Of course, most of the guilty folks this time around aren’t sporting any exotic accents.

Comment by Marc Authier
2007-01-21 08:26:05

They are probably already in this activity. Russian mobsters are good at these type of things. Anyways you don’t need the Russians to do it. American mobsters are quite abundant. The Kenny Boy types with good connections to Hillary Clinton/scumbag Lieberman and also George W. Bush. Bi-partisan mobsters.

Comment by rudekarl
2007-01-21 08:45:56

Funny you should mention this - the Dallas Morning News has a front page article today which shows Perry Homes’ deep connections with the Texas Supreme Court and how it’s affecting a couples’ ability to get compensated for the beat up Perry Home. Should really help sales of new homes around these parts.

Comment by txchick57
2007-01-21 08:48:19

I saw that. TX politics as usual.

I’ll never understand the mania around here to buy new houses. They are the shoddiest pieces of garbage you can imagine.

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Comment by rudekarl
2007-01-21 08:53:53

The townhomes directly across the street from me (next to the Farmers Market), have been in some form of reconstruction since their completion in 2001. First they were sinking, then the mold took over. It’s hilarious to see the same moving company pulling up, moving out the furniture, and the walls being torn out inside. They try to be very stealth, so as not to give the appearance that something is wrong. The one on the corner has been sporting a Keller Williams’ For Sale Sign with the word “Immaculate” hanging from it for the past six months (nobody biting). We took a look, and the realtor told us it had all new floors, wall treatments, etc. I knowingly asked why, and the goon paused and told me the place is “better than new.” My wife and I laughed and walked out. I love it when folks refer to stuff as “better than new.”

 
Comment by txchick57
2007-01-21 09:31:33

This place has had 14 open houses since early last fall. He’s also trying to rent it for $1200/mo. Kind of a cool place if you’re into the urban pioneer thing. I note the tax appraisal at 60K under his wishing price though. Good luck trying to make a profit on this beast.

http://www.davidgriffin.com/index.aspx?List=2795&Agent=46&Area=5&id=ctrl/Detail.ascx

 
Comment by Dan
2007-01-21 10:07:19

I’ve always wanted to live in a bright blue box…..

 
Comment by Karl Dahlquist
2007-01-21 12:32:05

That looks like something out of Real World. Is there are confessional room?

 
 
Comment by Marc Authier
2007-01-21 09:53:57

Bah it’s the same thing in Canada. Local mobsters with connections to the politicos. Like the ENRON bunch or the Fannie Mae bunch.

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Comment by JKB
2007-01-21 08:49:06

Sorry no mobsters here, just your ordinary garden variety greedy bubba. While they will surely find some organized crime activity, most of this fraud was done by your neighbor with no integrity. I’m sure they couldn’t believe that no one had thought of this before. Just a little cash under the table. A little advance MEW. Look no one stopped them. Now they learn as Enron did and the ’80s bond traders did, it is when you can’t pay that your called to account. This was small groups of low quality individuals just taking what they deserved. Of course, having never been held to account in their childhood, they are about to learn that in the adult world you can still get a spanking. A lot of people are going to be heading off to federal “pound you in the a**” prison.

Comment by rudekarl
2007-01-21 08:57:01

I agree - except for the part about prison. I’ll believe it when I see people getting prosecuted. The cops around my parts don’t even respond to burgler alarms, too busy trying to put down the invasion of gangs and other thugs to bother with that kind of stuff.

 
Comment by palmetto
2007-01-21 09:15:38

“most of this fraud was done by your neighbor with no integrity.”

VERY good point. That’s the bottom line. The boyz at the top can’t do it without the consent of those lower on the food chain. Which is why saying nothing to a friend who is doing something dishonest is not the good policy it sometimes seems to be.

 
 
Comment by Joe Momma
2007-01-21 09:05:59

Give me a break. How typical of Americans to blame someone else for their greed and corruption.

Not saying there aren’t Russians, or other foreigners involved, but this is a tiny slice of the problem.

This shit storm is 99.99% American made!

Comment by Marc Authier
2007-01-21 10:07:10

No. 99,99999999999 %

 
 
Comment by Joe Momma
2007-01-21 09:07:52

Give me a break. How typical of Americans to blame someone else for their greed and corruption.

Not saying there aren’t Russians, or other foreigners involved, but this is a tiny slice of the problem.

This storm is 99.99% American made!

Comment by rudekarl
2007-01-21 09:12:52

That’s why I said, it was like the Russian Mob dropped in, but that the folks perpetuating these crimes didn’t have any exotic accents (i.e. just typical Americans).

I’ll leave a translation of my biting sarcasm on future posts.

Comment by palmetto
2007-01-21 09:17:57

I got it, rudekarl. I think most people did.

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Comment by Bill in Phoenix
2007-01-21 09:31:25

Amazing that in a country with supposedly the highest amount of people who believe in God, such dishonesty is so commonplace from Joe Soccer Mom all the way up to big corporate fat cats. Corruption is built-in. And then when this fraud mushrooms into Congressional investigations and the talk radio circuit and hundreds of thousands of small time fraudsters are whining about their homelessness and the BK laws, the cure will be - you guessed it - prayer and church-going. The cure that is needed is zero tolerance from top to bottom of this prevalent dishonesty. Otherwise “rest”-assured, dishonesty, in general, in the United States will only get worse.

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Comment by palmetto
2007-01-21 09:34:42

Yep, Bill, I’m with you on this.

 
Comment by Joe Momma
2007-01-21 09:39:39

Welcome to America!

 
Comment by Lionel
2007-01-21 09:56:08

Bill in Phoenix, I’ve been thinking the exact same thing re: religion, corruption and hypocrisy. Just last night I was talking to a friend, who had a buddy, a devout Mormon, who was approached by a RE broker with a proposition: the broker would deposit 85K into his account, then after the deal closed, he’d return the money. Well, he did it. My friend asked him how he could do something so contrary to his beliefs. The answer: it got me into a house.

God help us.

 
Comment by Marc Authier
2007-01-21 10:02:09

Welcome to Canada, India, Pakistan, Switzerland, Great Britain, France, Monaco, Russia, Bouboukistan, Vanoooatu, Banana Land. You can’t even think of emigrating somewhere else. It’s not just an american cancer. It’s a global thing. Ben would be hanged in some countries for this blog. At least we can still talk about it in the West. For the moment at least ! Enjoy it while it last ! Maybe CON-gress will outlaw it in the name of fighting Al-Quaida and unamerican activities.

 
Comment by cmhappyrenter
2007-01-21 11:01:37

Having traveled to most places around the world, I have to agree with many of the comments here. Under the table deals are part of every day life. Get it now because it might not be available to you in the future. Of course, in a good portion of the world there may be no future as they change governments like clothing.

Sad to say, we’re becoming part of the global economy in both good and bad ways. No SOX requirements for J6P

 
 
 
 
 
Comment by Housing Wizard
2007-01-21 08:23:14

I contend that when the market changed in Spetember of 2005 ,the name of the game was cash back deals and incentives with Builders and the REiC . Brokers know that cash back deals are illegal and Brokers are suppose to check every deal their agents do .

Escrow/title companies would be aware of big cash payouts to parties other than the seller also. If the seller gives the money to the borrower after escrow closes by a side agreement thats still fraud regarding the transaction .

The fact that the agents were not aware of cash backs being fradulent is a sign that RE Brokers are not watching their agents or reviewing transactions or just closing their eyes .

The FBI should put out a alert about investment companies and investment company pay-outs to escrow companies/title companies etc .Loan doc. signings have to be recorded and a screening has to be done to stop identity theft ,(which would be easy to do by asking key questions to the borrower like credit card companies do when they are screening for idenity ).

Of course fraud would go off the charts with this no down sub-prime speculator lending ,no on site appraisals, etc.

This is the reason why I would have nothing to do with this market as long as these sub-prime lenders exist .

There was no reason why 2006 should of not crashed more, and the cash back and incentive deals kept that from happening .

I have been griping about this cashback/incentive fraud for a long time because I knew that this would be the next thing our wonderful REIC group that wanted to keep the party going would do . Also when you have desperate flippers and speculators who already have lied on their loan applications it doesn’t take much more for them to engage in this sort of fraud .
Casey Serin was able to get cash back deals very easy.
The whole situation makes me sick and the used market was copying the builder games also . The real estate market has turned into a crooks market .

 
Comment by Bigdaddy63
2007-01-21 08:24:39

Someone say “Casey Serin”?

Comment by txchick57
2007-01-21 08:27:47

Yeah, but he’s found god now, like they all do when they get caught.

Comment by rudekarl
2007-01-21 08:49:31

Maybe he can do a twofer, find God and go to rehab. He probably also had an alcohol and/or cocaine problem which led him to financial ruin. All is forgiven after you accept Jesus into your heart and complete a stint in rehab. Boy, I love this country.

Comment by txchick57
2007-01-21 09:41:29

I was thinking maybe after a year or two in the joint, he’ll become a disciple of Malcom X.

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Comment by palmetto
2007-01-21 09:53:39

Or a disciple of Holly Woodlawn.

 
Comment by Catherine
2007-01-21 10:01:46

From the looks of Casey, I think he’d be someone’s wife in short order.

 
Comment by Sammy Schadenfruede
2007-01-21 13:30:12

“Wife” implies monogamy, ideally anyway. Casey would be a human volleyball.

 
Comment by Mole Man
2007-01-21 16:25:28

It never ceases to amaze me how talk of wrongdoing quickly seeks the prison rape level. Mortgage fraud can be sneaky, so it is not that hard to see how this housing market situation could happen, but why are we as a society not only permissive of but harboring expectations of rape of men who are imprisoned?

 
 
 
Comment by Bill in Phoenix
2007-01-21 09:53:52

“Yeah, but he’s found god now, like they all do when they get caught.”

Very very true and very characteristic of the majority of Americans at all levels of their dishonesty. Another excuse is prescription drugs. Another excuse is temporary insanity. Call me cynical or call me sarcastic, but all this built-in dishonesty does not make me want to invest my money in America or its products the next dozen years or so.

Comment by txchick57
2007-01-21 09:59:50

Don’t forget being abused by priests or boy scout leaders. That’s a good one. People will believe you and cut you all kinds of slack.

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Comment by Jerry from Richardson
2007-01-21 10:57:16

The new fad is teachers raping their students. On top of that, they keep demanding higher pay and more time off besides the 3 months they get for summer.

 
Comment by rudekarl
2007-01-21 11:36:36

It’s OK if you’re a hot blonde. If you’re a guy, well, welcome to prison.

 
Comment by Sammy Schadenfruede
2007-01-21 15:15:24

Don’t forget the esteemed gentlemen like Mark Foley, sodomizing interns and taxpayers with equal gusto.

 
 
 
Comment by Marc Authier
2007-01-21 10:09:37

Like Kenny Boy ?

 
 
 
Comment by Jerry from Richardson
2007-01-21 08:27:33

Any potential buyers in the Valley should demand a 40% discount off the comps

Comment by Bill in Phoenix
2007-01-21 09:37:42

I demand 50%, but I’m not shopping around. For my lifestyle, which is always traveling, I don’t want to be a maintenance slave like even most posters here. That is, a condominium with HOA for maintenance, and 24/7 guarded and gated and high end (so that to weed out hoods blaring rap “music”) is perfect to me. It will take at least 5 years. The low end condos will be $40,000 for 2 bedroom 2 bath in crack house communities while I think the top quality luxury condos with 24/7 guarded gated communities will be $120,000 for the same square footage - in upscale communities.

 
Comment by rudekarl
2007-01-21 11:38:40

“Any potential buyers in the Valley should demand a 40% discount off the comps.”

Jerry, aren’t you afraid that you will “insult” the seller?

 
 
Comment by Geeski
2007-01-21 08:31:07

About time that there is official acknowledgement of this mess. While I cannot easily prove, I think this happened twice in the same building in midtown Phoenix. Regency House on Central Ave had recent sales for unit 705 and unit 1404. Both units had been for sale for months, and had numerous price reductions. Then, amazingly, the prices WENT UP and both sold. I smell a rat, and sadly that screws the other owners trying to sell in that building because they think the comps now support their asking prices. Sad.

Comment by Geeski
2007-01-21 08:41:21

Correction - for units 705 and 404, not 1404.

Comment by spike66
2007-01-21 09:47:35

Geeski,
save that info and post it on Paladin’s upcoming fraud website.

 
 
 
Comment by Mike
2007-01-21 08:38:58

Rampant fraud and deception. More reasons NOT to buy for several more years until this mess is cleaned up. The great “Greenspan Plan” of easy money is now in shreds.

The whole financial system is bloated with confetti money and it is no longer possible to determine the true value of assets like property because of all the scams and not just in Arizona but everywhere. Why should anyone buy a property which might have been subjected to a string of scam operations, ranging from fake appraisals to crooked building inspections to inferior workmanship to carpet-bagger mortgage broker deals, to under the table add on cash out deals, to money laundering, etc. It makes you wonder what kind of legal problems are going to arise with all these back door crooked “deals” going on. You could buy a property and 5 years down the line discover it isn’t even yours. Of course, some might say say title would insure you against fraud but the whole set up is now so crooked I wouldn’t be too sure that the scam artists haven’t worked out something to foil that. We are looking more like a south american banana republic every day.

 
Comment by crispy&cole
2007-01-21 08:49:13

Does anyone know in Arizona know who “Ron Pratt” is?

He is from Chandler, AZ and was on the Barrett-Jackson auction last night and he purchased a Shelby Cobra for $5,000,000. I googled the guy and can’t find anything.

Comment by Catherine
2007-01-21 09:59:20

I don’t know who he “is”….but he sounds like an idiot.

 
Comment by bradthemod
2007-01-21 10:45:26

Isn’t he the guy that invented the saying ” You want fries with that? ” ?

Comment by Marc Authier
2007-01-21 17:47:47

French fries or Freedumb fries ?

 
 
Comment by Bonk
2007-01-21 11:54:23

He’s stirring up quite a lot of interest at the Barrett-Jackson auction. He made his money in real estate. Imagine that.

“His background in the production housing industry out in here the West has treated him well. A couple of years ago national mega-builder Pulte Homes purchased his framing company in a deal that enabled him to pursue his car collecting passions further.”

 
Comment by BanteringBear
2007-01-21 12:25:23

Yes, I think I have heard of him. If I am not mistaken, he’s one of those get rich quick gurus.

 
Comment by Johnny
2007-01-22 18:57:19

He is the largest developer in AZ and NV. Largest in wood frame and concrete.

The name is spelled Ron Pratte.

 
 
Comment by Lisa
2007-01-21 08:49:15

This “House of Cards” will collapse on everyone, not just speculators.

“Less than a decade ago, home buyers had to put at least 10 percent down on a mortgage, show all types of proof of income and even how they earned the money for the down payment. Now, buyers are getting into houses for nothing down and with little proof of income.”

Bingo. This is what put a cap on home value increases. They had to be in line with income because a buyer actually had to have savings and the income to actually afford the house.

I bought in ‘96, sold in ‘04, and I remember how difficult it was to qualify for my mortgage - the questions and proof of income and cash reserves, etc. was exhaustive.

For the past few years, “qualified” buyers have been competing against yo-yo’s who can’t save and can’t make the payment once their teaser rate expires. This will hurt everyone.

Comment by Housing Wizard
2007-01-21 09:23:47

Yep ,this easy money ,low down ,don’t have to qualify cr-p pushed the market up beyond reason and the house of cards is crashing .
I am not very pleased with the REIC part in this big game of cheat the lenders ,create a speculation market .

The real estate agents knew the mortgage people they were sending people to, and don’t be surprised if agents didn’t get kick-backs from the scum mortgage people .

I contend that the RE market is so riddled with fraud ,speculators , unqualified buyers and illegal deals that it’s not a market that anyone can feel safe about the appraisal values .
Instead of the REIC trying to keep the party going , this RE market needs to stopped in it’s tracts and all reasonable lenders need to strike the sub-prime lender comps .

Easy money never works in the real estate market because its a conditional sale based on qualifying for the loan and the real estate taxes . Market value is based on a “willing and able buyer “,not crooks ,unqualified buyers ,speculators ,developer hype etc.
I for one say that the NAR/REIC is not disclosing the true problems with this market in it’s current state and the MSM needs to alert the public to the fraud and advise peole not to engage in it and report RE agents that are doing it .

 
Comment by Sensible Lender
2007-01-21 09:51:58

I have been saying for years that the big run up in prices was caused by 100% financing, Stated income, and Loans with unsustainable artificially low payments. Of these, 100% financing is cause for the most concern. In 2004-5 when we saw bidding wars here in SoCalif, the winning bidder was the one who offered the most over listing and often was using 100% financing. In addition to the kind of fraud described in Arizona, it just causes prices to increase for honest people too. With no requirement for a downpayment, it lifted this constraint on price. It was all a matter of monthly payment (an intitial low payment.)
What I am noticing is the large number of homes for sale now that were bought in 2005, and with 100% financing. From the appraisals I am seeing lately, we are back down to values seen in mid 2005. With selling costs, these homes for sale are already in the “short sale” situation.

 
 
Comment by ffischer_76
2007-01-21 08:58:39

This is flattly not true!

When not DISCLOSED it is fraud, however ADRE simply says, disclose, disclose, disclose. Then it’s not fraud.

Mortgage brokers who use stated income and then fill in the blanks are committing fraud.
Buyers who speculate and then say they are owner occupants are committing fraud.
Sellers who are guallable enough to give back money(when not disclosed) are committing fraud.

HOWEVER NEVER, NEVER, NEVER is it fraud when legitimate contracts offer give backs for repairs(should be held in escrow until completed by licensed contractors) or paying for buyers closing costs in escrow.

Remember it’s disclose and then it’s not agents fault!
Sue who you like but I will prevail because I DISCLOSE!
IF THAT IS WRONG THEN GET RID OF EVERYONE INVOLVED INCLUDING THE GOVERNMENT DEPARTMENTS!

Comment by crispy&cole
2007-01-21 09:10:51

“IF THAT IS WRONG THEN GET RID OF EVERYONE INVOLVED INCLUDING THE GOVERNMENT DEPARTMENTS! ”

So that is how we operate in the REIC - Its ok if everyone else is doing it? I think I will have to change the list of values I teach my kids?

How about the realtor “code of ethics”??

 
Comment by crispy&cole
2007-01-21 09:12:41

Clearly you are a realtor has you blame eveyone else for committing fraud - Mtg brokers, buyers and sellers. Why not agents?

 
Comment by John Law
2007-01-21 09:15:46

I’m no lawyer, but if something is illegal it doesn’t matter if you disclose it. if you get weed back at closing, is it not illegal because you disclosed it?

Comment by crispy&cole
2007-01-21 09:19:24

LMAO!!

 
 
Comment by Catherine
2007-01-21 10:08:20

What you state about disclosure involving repairs and paying closing costs is true. HOWEVER, an agent is a paid participant in a transaction, and a transaction that involves a crooked lender, a shady appraiser, etc. is still the responsibility of an agent, representing either buyer or seller.
So, close your eyes while you “disclose”…you’re still in it, dude.

Comment by Housing Wizard
2007-01-21 10:30:10

The real estate agents know damn well when a deal isn’t written up right regarding the lender and disclosure . Don’t let the real estate crowd fool you ,they know what the rules are .Again I also say that RE Brokers are suppose to review all their agents deals ecause they are also liable . Interesting how so many check and balances in the system didn’t work .

 
 
Comment by JP
2007-01-21 11:14:11

Fraud is fraud. If it’s disclosed on the paperwork, then it’s a documented fraud and will make a DA very happy.

Cut a deal while you still can.

Comment by scprofessor
2007-01-21 11:57:25

Back in the ’70s it use to couched in this type of language for that POS home that was worth at best $25K

Buyer has handed seller, outside of escrow $25K
and buyer will cause to be deposited into escrow the sum of $75K which represents the proceeds of a new loan secured by a first deed of trust, to complete the total purchase price of $100K.

This isn’t anything new. Been going on for a lot longer than most people who frequent this board have been involved in making adult decisions. Wasn’t lawful then. Isn’t now. Only difference was most of the time it didn’t work because lenders treated the loan as though it was going to be retained in their portfolio. Today’s rule is pump and dump into the secondary market.

 
Comment by mjh
2007-01-21 12:01:17

I was under the impression that the fraud was due to taking out a mortgage for more than the cost of the house without making the lender aware of the situtation. IIRC, if the lender knows that this is happening, and still agrees to fund the loan, there is no fraud.

This is why disclosure prevents fraud, because you’re no longer defrauding the lender.

Comment by winjr
2007-01-21 12:20:10

“This is why disclosure prevents fraud, because you’re no longer defrauding the lender.”

There’s one more step to take: Is the lender disclosing the cash-back to the MBS buyer?

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Comment by Misstrial
2007-01-21 14:04:52

No.

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Comment by Housing Wizard
2007-01-21 21:29:10

I guess the REIC know what lenders to go to where the underwriters don’t even read the disclosed escrow instruction and purchase contract .

 
 
 
 
 
Comment by JKB
2007-01-21 09:06:22

Let’s not forget that this downturn is all about the buyer confidence. If the buyer would only have confidence in the market, all wold be well. Don’t believe me, just read all the quotes from agents and others. Of course, you could go back to 1932 and read about all the pleas for businessmen to show more confidence.

Now we start with the inevitable reports of widespread fraud driving up prices. Anyone care to speculate how that will affect buyer confidence?

I nominate Blood, Sweat and Tear’s Spinning Wheel as the official RE bubble song.
http://www.guitaretab.com/b/blood-sweat-and-tears/1864.html
We are coming to the second verse “You got no money and you got no home”

Comment by skip
2007-01-21 11:55:58

I nominate the O’Jays theme song from Trump’s Apprentice show. Funny how they edit out some of the lyrics:

For the love of money
People will steal from their mother
For the love of money
People will rob their own brother
For the love of money
People can’t even walk the street
Because they never know
Who in the world they’re gonna beat
For that lean, mean, mean green
Almighty dollar, money

For the love of money
People will lie, Lord, they will cheat
For the love of money
People don’t care who they hurt or beat
For the love of money
A woman will sell her precious body
For a small piece of paper
It carries a lot of weight
Call it lean, mean, mean green

 
 
Comment by Sammy Schadenfruede
2007-01-21 09:11:54

The MSM pretends this ‘House of Cards’ will only collapse on speculators and FBs. Wrong. The sheer magnitude of the fraud and overextension of credit in recent years threatens the entire US and global financial system.

http://www.321gold.com/editorials/willie/willie011807.html

“Where a crisis looms near is the banking sector, from widening cracks in the housing foundation hitting bank balance sheets. So far those cracks have been hidden, like with private sales of discounted mortgage bonds to hedge funds, all under the radar. But evidence finally has surfaced of the housing decline extending to the mortgage industry. The Rothbard words as so relevant today, as the housing bust unfolds. Perceived as a harmless correction, the downturn will simply not go away, and will morph into an uglier form. Beware of ripple effects, momentum, and feedback loops.”

Comment by palmetto
2007-01-21 09:26:24

Great article, Sammy, thanks for the link.

 
Comment by Marc Authier
2007-01-21 10:12:59

That’s why it will be real entertaining looking at the junk bond racket too. Another nice mega bubble is about to burst.

 
 
Comment by DAVID
2007-01-21 09:14:20

“‘He wanted the money under the table after the deal closed,’ Barry said. ‘He said he had a lender with an appraiser who could ‘make the deal happen.’ Barry knew the deal was bad but was obligated to present it to his clients, who also thought it was too fishy and passed.”

There is no difference between these idiots and the Mafia.

 
Comment by need 2 leave ca
2007-01-21 09:20:28

A thread yesterday asked about people leaving CA for another area. I am now in Albuquerque NM. I am well qualified to speak on that subject. The pros of leaving: greater house affordability - now have a nice home at 25% of what it would have been in the BA. Child is much happier because she more things to do, more space to play, more friends, better learning environment, more social, etc. Same for my wife. Same for me also. Many other things much less expensive. Area here has abundant outdoor items like mountains, hiking, scenic beauty. Much less traffic, and much cleaner air. People much more laid back. A few drawbacks - wages are much lower. We took a paycut to leave CA. We are paying more $ for housing now from a small apt to a bigger house. But overall great move.

Comment by palmetto
2007-01-21 10:13:58

Thanks, need 2 leave ca. I am curious about this phenomenon overall, not just people leaving CA, but the Northeast, Florida, etc.

 
Comment by rms
2007-01-21 23:44:29

How does the cost of household energy rank there in Albuquerque, NM.?

 
 
Comment by bubbleglum
2007-01-21 09:26:40

Craigslist number of “cash-back” appearing in RE listings by city 1-21-07

Phoenix 529
Denver 254
Chicago 120
Dallas 230
Boston 78
Las Vegas 306
Los Angeles 204
Miami 339
Minneapolis 240
New York NY 205
Orange County CA 236
Sacramento 68
San Diego 62
Seattle 175
SF bay area 147
WA DC 171
Atlanta 434
Portland 44
Philadelphia 183

Comment by palmetto
2007-01-21 09:32:21

Wow, Phoenix leads, followed by Atlanta, followed by Miami. Phoenix and Miami don’t surprise me. But Atlanta?

Comment by txchick57
2007-01-21 09:55:44

Atlanta is like an East Coast Dallas. Flies under the radar but lots and lots of corruption and fraud.

Comment by P'cola Popper
2007-01-21 16:11:29

Perfect description.

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Comment by Catherine
2007-01-21 10:11:35

and these are just the gonzos who use craigslist…sweet holy moses, I see this type of thing on bulletin boards at Safeway.

 
 
Comment by Gravity
2007-01-21 09:46:25

oh, great

No wonder the published medians always seem way higher than you’d think they’d be by now (in the crash cycle).

Comment by Marc Authier
2007-01-21 10:15:47

And then we will have the “TRASH CYCLE”.

 
 
Comment by Sunsetbeachguy
2007-01-21 11:21:22

Following up for Paladin.

Hey dumba$$ law enforcement lurkers here. (FBI, DA, AG, local PDs)

Get to work, I pay your salary.

Comment by spike66
2007-01-21 12:06:05

Following up for Paladin

Hey dumba$$ reporters lurking here, (NYTimes, LATimes, Time, Newsweek, etc.)

Get to work and try to keep up with the news, your industry is already facing major layoffs, want join the unemployment lines?

 
 
 
Comment by Joe Momma
2007-01-21 09:27:55

The level of fraud we are witnessing is stunning. I won’t be buying until this mess is worked out of the system. 40% off current prices is a good start, but that might not be low enough.

Buying now is financial suicide. Buying next year is probably financial suicide. This can only end with a massive recession.

Comment by Jerry from Richardson
2007-01-21 10:55:21

What makes you think you will have money to buy after the massive recession?

Comment by kerk93
2007-01-21 13:07:55

Folks have done research on housing, but haven’t taken the time to understand banking, and fractional reserve lending. When folks understand the latter, they will realize banks are next (after subprime lenders), and their Money Markets and CDs just vanished. With a little more research, they’ll realize the FDIC is an insurance company. They’ll be overwhelmed as well. That is, unless the FDIC has a few trillion dollars (can’t since the Treasury states there are only 960 billion in currency and coin in circulation) sitting in their vaults. Granted, that is just physical stuff. The rest is electronic credit. The FDIC doesn’t have trillions in electronic notes sitting on their books either. How do you think they make money? Same way. Loan out premiums from banks with FDIC insurance to turn that stuff into interest payments.

Yes, I think after this, many will understand exactly how our system has worked. It won’t be fixed until the pain is apparent. Humans are just built that way. Why fix something when it currently appears to be the way everyone gets rich.

Comment by foreclose_me
2007-01-21 14:06:39

Yep. If you want to hold dollars/cash (other than in your pocket), don’t use banks. Use treasurydirect.gov 4-week T-bills. The next question is how many dollars to hold.

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Comment by Misstrial
2007-01-21 14:14:08

http://www.treasurydirect.com was discussed in this Forum back in September of ‘06. Many of us have already moved to protect our positions.

 
Comment by PDXrenter
2007-01-21 18:17:42
 
 
 
 
Comment by Bill in Phoenix
2007-01-21 10:55:51

True. Phoenix is but one example. Runner up as someone else posted, is Atlanta. And this type of RE fraud is only one of many types that are sweeping this “God-fearing” (LOL) nation.

Got Gold?

 
 
Comment by rpatrick
2007-01-21 09:33:07

Sorry guys missing how this works, or how you make enough cash to make it worth going to jail and being someones BF.

1. I have a house it’s worth 100K
2. I try to sell house, Tony Soprano comes up and says I’ll buy it for 150K and you at the closing give me 50K, I am a FHB so I say yeah whatever get this thing off my hands, is this where that Straw buyer comes in?
3. Tony gets the house appraised for 150, gets a 0 down note for 150. Gets the 50K check after the closing.

At the end
I have 100K - mortgage and closing costs
Tony has 50K and a loan on a house - closing costs
Bank has a loan for 150K

So then Tony walks away never makes payments and the bank loses 60-70K, and his credit is shot but who cares? Or it;s the straw buyers problem since there is a really clear listing of who did what with names and addresses here.

The fraud is the Bank being told it was worth 150K right?

Comment by Marc Authier
2007-01-21 10:19:39

No the fraud is the bank lending while perfectly knowing that something is not right.

Comment by mjh
2007-01-21 12:12:06

Wrong, this is defrauding the bank, as they believe that 100% of their money goes towards purchase of the house. The buyer, seller, or agent(s) must disclose the kickback to the bank, which makes it legal.

 
Comment by Paladin
2007-01-21 12:39:50

yes, and then the bank (mortgage lender) sells the loans in bundles to the teachers’, firemen, and policemen pension funds, not to mention the 401(k) bond fund you use for the “conservative” part of your retirement portfolio. Everyone loses except the criminal…..until you catch him.

 
 
Comment by ws
2007-01-21 10:25:22

that would be part of the fraud — another part would be not disclosing the true terms of the deal to the lender.

alot of this though could be avoided if lenders review appraisals b4 making loans on them. the appraiser is supposed to include the 1 year listing and 3 year sales history of the subject (and the 3 year sales history of the comps in each report.

In other words, if the property is listed for sale at $100,000 and then later raised in price to $150,000 to do the fraudulent deal, that listing history should be in the report. if the appraiser doesn’t put in it, it’s fraud.

and if the lender reviews the report prior to making the loan, their review appraiser should pick up the same info even if it’s not in the report.

big problem is that most lenders don’t review the reports b4 the money is loaned.

Comment by Michael
2007-01-22 12:49:22

You said, “alot of this though could be avoided if lenders review appraisals b4 making loans on them.”

I work in subprime underwriting, and I can assure you that the majority of the underwriting process involves appraisal review!

 
 
Comment by watching in Reno
2007-01-21 11:40:22

But who pays the taxes on an inflated deal?

 
Comment by Misstrial
2007-01-21 14:10:28

If this is your situation, please see a criminal defense attorney who specializes in representations in U.S. District Court in the locale where the property is located. Also please see an attorney who specializes in real estate law for your State.

Comment by rpatrick
2007-01-21 17:39:27

It’s not, I was just trying to understand how this worked. I mean lets faceit most of us are honest people

 
 
Comment by JKB
2007-01-21 19:05:34

The fraud occurs against the lender if it is determined that false representations that materially influenced the lender’s decision to loan the extra $50k. There must be an overt act and not just normal business risk. One can argue the lender’s due diligence but that doesn’t forgive fraud.

FRAUD, contracts, torts. Any trick or artifice employed by one person to
induce another to fall into an error, or to detain him in it, so that he may
make an agreement contrary to his interest. The fraud may consist either,
first, in the misrepresentation, or, secondly, in the concealment of a
material fact.

 
 
Comment by Frank
2007-01-21 09:43:32

We have 12 million people that are illegal in this country, few more illegal transactions won’t hurt as long as we all make money. :)

Comment by Jerry from Richardson
2007-01-21 11:01:21

I say open the floodgates. There’s at least 1 billion people in India and China who want some freebies. Why should the Mexicans be the only ones who get amnesty? Dissolve our borders and join the New World Order. We will be under the rule of the United Nations with North Korea in charge of human rights and Sudan in charge of diversity.

Comment by spike66
2007-01-21 12:01:13

Oh, I don’t know. How about China in charge of human rights and Japan in charge of diversity?

 
 
 
Comment by rudekarl
2007-01-21 09:44:31

This morning, I saw one of the commercials that is part of the new NAR campaign. Apparently, now is a great time to buy. Selection has never been better. It almost made me want leave my apartment today to go out and make the worst financial decision of my life. But, then I thought better of it, and came back to the HBB.

Comment by txchick57
2007-01-21 09:57:54

I got bearish on Dallas again in 1999 when they started overbuilding the apartments and retail in the Knox/Henderson/McKinney areas. I am shocked it’s been able to hold up as long as it has.

 
Comment by Lisa
2007-01-21 10:34:19

I saw the same commercial. Warm and fuzzy. Like massive amounts of inventory and no buyers are a good thing for folks looking to join the ranks of FB.

The commercial also quoted a couple saying their mortgage was the same as their rent. In what part of the country, pray tell? Or was this a suicide loan?? Of course this was never specified in the commercial.

Comment by Bill in Phoenix
2007-01-21 11:15:12

Warm and fuzzy but not syrupy, like the radio commercial I heard recently in Phoenix. Sounds of family life - Kid gets a boo boo and mother comforts the child. Then mother and father look out the window and mother says about their dog “look, Rex dug his first hole in our first home’s yard!” I forgot which builder advertises it. I almost wanted to reach for a barf bag.

Comment by PhillyTim
2007-01-21 12:10:22

Do they even have backyards in Phoenix? They are all smaller than postage stamps and have ten foot high fences enclosing them.

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Comment by rudekarl
2007-01-21 11:44:56

Lisa, I thought I heard the couple saying that with some new types of loans, their mortgage payment would be the same as their rent. I immediately thought about the fine young folks pulling the trigger on a nice option ARM. Then again, so much of the dialogue on the commercial came at me so fast, that I might have experienced some type of Bubble Blog flashback while viewing it.

 
 
 
Comment by Housing Wizard
2007-01-21 10:41:28

As far as I’m concerned Donald Trump was committing fraud when he got his straw buyer friends and family to buy into one of his pre-construction projects to beef the sale numbers up so he could get the construction loan , than he cancelled his friend and family contracts after he got the construction loan . Trump should be called on this .

 
Comment by need 2 leave ca
2007-01-21 11:16:57

trump should be the poster boy for prison. would love to see his boyfriend.

Comment by Paladin
2007-01-21 12:46:19

Trump in prison: “Pull my hair….harder, harder. Yes…hurt me.”

 
 
Comment by Matt_In_Tx
2007-01-21 11:20:54

I’m using two tickets to Trump Jr.’s upcoming Dallas area real estate seminar… for bookmarks. Nice parchment. I’m a little scared though that the ink might run, so I’m only using them in paper backs.

Comment by rudekarl
2007-01-21 12:00:45

Trump, Jr. is now doing seminars? Not much I can add to that.

 
Comment by Cassandra
2007-01-21 13:46:44

Pretty funny. A couple years ago a friend stationed in Iraq sent each of my kids an Iraqi 10,000 whatever note. Funny thing was that the ink did run and stained the inside of the card.

Comment by Paladin
2007-01-21 16:36:25

A lot of that currency was counterfit. And a lot of U.S. currency they found over there was counterfit, too.

Comment by Matt_in_TX
2007-01-21 20:29:03

I’ll have to check back on those “deals” to buy Iraqi currency a couple years ago when it was set to “go through the roof” do to the new government doing whatever it was they were supposed to do to make speculators all rich.

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Comment by Dan
2007-01-21 14:12:59

http://activerain.com/blogsview/36875/When-the-wall-comes

A pretty straight shooting realtor blogging about a FB client who is “trying” to sell AND has refied FOUR times……read comments. Pretty interesting reading

 
Comment by Pete
2007-01-21 20:59:50

Timber!!!
Good things have to come to an end.

 
Comment by Anti-Fraud Superhero
2007-01-21 23:29:53

(Formerly ‘Auction Heaven in ‘07)

Kudos to the Arizona Republic for a well done piece.

The first of many, many, many to come.

Yes, as Ben said, it was a bit late in coming.

But alas, it finally arrived.

Keep diggin’ y’all.

There’s lots and lots more surprising revalations where this came from.

Lots.

Comment by Paladin
2007-01-22 19:32:59

AFS, what happened to AH07? Is it time to move the sites out a year or two, because the bottom is going to be much lower than previously thought. Will you Take the Bate in 08, or Mark Time ‘Till 09?

 
 
Comment by Becky in Ohio
2007-02-09 22:09:13

Interesting reading from you all.. I’m looking to relocate to AZ soon. Now I know not to buy.. Ohio RE is very low.. don’t know about scams, but are coming soon I’m sure. I live in a house that is about $350k but in CA or AZ would sell for over $1mil. I can’t imagine at this point purchasing.. Any suggestions for rentals Flagstaff area?

Comment by Ben Jones
2007-02-10 04:54:35

Becky,

I am very familiar with rentals in this area. Be picky! Don’t rent from a flipper, who are numerous in the Ponderosa Trails subdivisions. It’s best to work with a property management company. Flagstaff isn’t cheap, but the market has loosened up quite a bit in the last year, so don’t be afraid to haggle on the price.

And it gets cold. Be sure to pay attention to insulation and how the home is heated. Good luck!

 
 
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