Planted In The Prison Yard
By the Magnificent Flying Miser
The National Association of Realtors (NAR) and the National Association of Mortgage Brokers (NAMB) have been lobbying hard to prevent, delay, and reverse any legislation that would give government regulators more sway over the real estate industry. Both organizations have spent a lot of time and effort convincing consumers that their members are professionals, having received auspicious licenses from trustworthy boards. Why in the world would we need additional state oversight when these professionals are already being held to such high standards? But let’s take a look at what went on during the recent real estate bubble. Did the NAR and the NAMB do a good job at weeding out criminals and preventing fraud, or do they need a little help?
From the Office of Law Enforcement Support, Financial Crimes Enforcement Network (warning, PDF).
“… Depository institutions filed an increasingly large number of suspicious activity reports documenting suspected mortgage loan fraud between 1996 and 2008. (In 2007), depository institutions filed more than 62,000 reports, compared to 14,484 (in 2003).”
“Professionals in real estate and financial industries frequently were reported as subjects in all of the suspicious activity reports examined. … Financial industry occupations, including mortgage broker, … were documented in 32 percent of the reports from insurance companies reviewed. Twenty-one percent of subjects were identified as real estate professionals, such as real estate agent …. Similarly, real estate and financial occupations constituted the largest occupation groups reported by money services businesses.”
“FinCEN’s 2008 report on mortgage loan fraud identified California as the state that reported mortgage loan fraud most frequently. A review of reports filed by money services businesses and casinos also showed that most study subjects resided in California. A review of reports filed by insurance companies, however, showed more suspicious activity by residents of Florida than any other state, including California.”
From Mortgage Fraud.org:
“On June 4, 2009, investigators from the San Bernardino County Real Estate Fraud Prosecution Unit arrested a Rancho Cucamonga real estate agent in a fraud scheme that has defrauded scores of victims in the county. Beginning in 2006 and continuing through 2008, Richard and Desiree Nazabal solicited funds from victims to invest in several Inland Empire homes with the stated intention of renovating and reselling the properties at a profit. More than twenty-five people invested more than $2.5 million dollars with the Nazabals. Instead of investing the victims’ funds, the Nazabals used the money for personal gain and never purchased homes for the victims.
And this:
“Starting in 1999 through in 2001, LaDonna Mullins, aided and abetted by others, devised a scheme to defraud and to obtain money and property by means of fraudulent representations and promises from mortgage companies that funded federally insured loans. As part of the scheme, Mullins and others working with her would locate buyers who desired to purchase a residence but were unable to qualify for a mortgage using the buyers’ accurate credit history, income and employment, and/or other financial information. The defendant and others working with her would assist buyers who could not qualify for an FHA-insured mortgage legitimately …”
“‘Her fraudulent actions resulted in the foreclosures of Colorado homes, which have added to the destabilization of the real estate market,’ said Christopher M. Sigerson, Special Agent in Charge, IRS Criminal Investigation, Denver Field Office.”
From the Milwaukee Wisconsin Journal Sentinel:
“Sometimes the seeds for a real estate career are planted in the prison yard. Real estate is a popular subject among the drug dealers and white-collar criminals doing time in low-security federal prisons — facilities often called Club Feds.”
“Michael Rowsey’s foray into real estate began almost the moment he was placed behind bars. Rowsey was sentenced to 17 years in prison for first-degree reckless homicide for shooting and killing a Milwaukee man in 1991. Rowsey got his loan broker’s license in 2005.”
“Rachel Dollar, a California attorney who tracks mortgage crime nationally for her website, says much of the nation’s mortgage fraud was committed by people who had records before entering the business.”
“‘The fact is that a lot of felons do become repeat offenders,’ she said. ‘We do see a significant number of mortgage fraudsters who engaged in similar conduct or in other forms of criminal conduct in the past before obtaining licenses.’”
Thanks Miser.
“Michael Rowsey’s foray into real estate began almost the moment he was placed behind bars. Rowsey was sentenced to 17 years in prison for first-degree reckless homicide for shooting and killing a Milwaukee man in 1991. Rowsey got his loan broker’s license in 2005″
Way to Go with the Post Title Miser.
Wisconsin may be fly-over country but our small time RE thugs, criminals, hoodlums and roaches got HBB Top Billing today !
Rachel Dollar, a California attorney who tracks mortgage crime nationally for her website, says much of the nation’s mortgage fraud was committed by people who had records before entering the business.”
“‘The fact is that a lot of felons do become repeat offenders,’ she said. ‘We do see a significant number of mortgage fraudsters who engaged in similar conduct or in other forms of criminal conduct in the past before obtaining licenses.’”
On a Ca R E License renewal form, they ask about felony information. And I feel bad about my traffic ticket I took traffic school for 2 yrs ago. I need to study how to become a sociopath.
awaiting, well you won’t become a sociopath here, that is for sure.
Not in HBBland.
This is interesting stuff.
In California, if you are a member of the state bar IIUC you get waived in to get a RE license without taking the exam. All you need do is mail in your bar cert with a check and you get a RE license. Not sure if it’s only good for agent or for broker too.
In some respects makes sense - the first year of law school is all about contracts, torts, and real estate law. If you pass the bar exam you should know this stuff fairly well - better than most realtors.
But I’ve heard a lot of lawyer scuttlebutt about how selling real estate is a fall-back position for members of the bar who got drummed out for ethics violations. If these rumors are true there are a lot of ethically-challenged former lawyers selling real estate.
“But I’ve heard a lot of lawyer scuttlebutt about how selling real estate is a fall-back position for members of the bar who got drummed out for ethics violations. If these rumors are true there are a lot of ethically-challenged former lawyers selling real estate.”
Then there are a whole lot of beauty-salon-addicted divorcees with law degrees out there!
Florida is worse…imagine you can hold a mortgage broker license and have millions of dollars in foreclosures on your credit!!…that’s like getting help from a doctor who pops pills…
During my time is this business…I have sat next to many ex-attorney’s in the bullpen…
DennisN
I finished my Brokers ed and will be testing, but I am still thinking about hiring an Attorney to represent us in an REO transaction for cash (primary residence). Some of the revised laws, and the darn Bidding Arbitration clause on the froms make me nervous. “Subject To Judicial Review” and I want an esquire to back up my position.
I’ve got a question, Dennis. Is it true the first year of law school also covers inductive and deductive reasoning? I am taking a critical thinking class in summer school. I think its important to understand the different approaches. Any feedback, advise, or good books to read to?
There’s no specific course work in logic….it’s presumed you know a lot before showing up to law school.
People talk about how law school “makes you learn how to think like a lawyer”. My take on this, coming from my physics and math background, is that law school takes students with a social science/humanities background and makes them think like a physical or biological scientist.
Law curriculum, especially in that first year, is pretty much standard at all ABA accredited schools:
Contracts
Torts
Real Property
Civil Proceedure (e.g. jurisdictional stuff)
Criminal Law.
You will also have a course in “legal writing and research” which isn’t graded and is a real time consumer.
I guess this is a long winded way of saying I don’t really have any particular advice to give you.
Thanks Dennis, for your reply.
IIRC, you’re an EE that went into IP law. My husband was formerly an Engineering Mgr (R&D) with Intel. His name is on patents. He made others lots of $.
Have a great day.
My name is on a lot of Intel patents too - as “legal rep.”.
As DennisN pointed out, oddly enough, Logic is taught at a basic level for Applied Maths and Computer science.
Its used a lot in mathematical proofs, Venn Diagrams and their ilk, the ‘laws’ of mathematics, and as the construct for Boolean Algebra (used in many programming languages).
Strange as it might sound, looking through a HS Maths textbook should give you basic Logic arguments.
I am sure many “real estate professionals” commit crimes, but not sure about whether it makes sense to use these examples to paint the entire industry with a broad brush. Couldn’t one make the same kind of example-driven argument for attorneys, Congressmen, medical doctors, etc?
Medical doctors don’t try to make a buck any way they can. The others… you have a point.
Real estate professionals need to be exposed for the fraud they are. My unscientific survey over my lifetime points out that 2% of Realtors ™ know more about the market than an informed buyer. The other 98% are leaches who will pressure every buyer into signing for the commission check.
Open the MLS. Make it so that statistics are easier to find/graph.
Most of all, campaign to keep the appraisal process more fair. I’m not saying the new process is great, but its better than the fraud of the bubble. An appraisal is supposed to be for the price the second greatest fool will pay. Considering the political pressure the NAR is putting out to end the ‘hands off’ appraisal process, I find them very fraudulent and not behaving as a profession should. They are nothing but used house salespeople (excluding the 2% of them who are truly professionals, like JTR).
The government mucking with loans is going to stretch out this downturn. Oh, I notice ‘flip this house’ and other shows no longer profile the Realtor ™ as if they were someone special. Heck, they weren’t interviewed at all on this morning’s new shows. (If my wife is going to watch HGTV… I want her to see failed flips and declining markets.)
We cannot go back to an economy selling each other stuff. Why, with the internet, did we doubt the fraction of the population who are salespeople? Hmmm… those jobs are gone. The NAR is trying to return to a bubble economy that is dead.
/rant
This doesn’t matter. End of summer sales are falling apart. Soon we will enter the worst time of the year to sell a house; that is October-February for anywhere that isn’t a ’snowbird’ destination. FWIW, I’m not expecting to see snowbirds ’snap up’ homes this winter.
Got Popcorn?
Neil
“Open the MLS. Make it so that statistics are easier to find/graph.”
I concur. Real estate transaction data is a public good. Why not add it to the list of statistics produced by a government agency (e.g. the Census Bureau) rather than allowing the NAR to maintain a monopoly? The real estate market would become far more efficient if the data were easier to obtain, and as a desirable byproduct, the risk of future housing bubbles would decrease.
Isn’t the MLS open through Realtor.com and several others? Or am I missing a piece?
neil, I love your stuff, always, but really 98%? stretching the stats?
lol.
“Medical doctors don’t try to make a buck any way they can.”
Again, probably most, but with our health care today the way it is, governed solely by pharma and the ama, about 20% +/- will set you up with tests that aren’t warranted. If only they would talk to you and watch your mannerisms…old MD’s from days of yore do that.
“20% +/- will set you up with tests that aren’t warranted”
I disagree- that figure is waaaaaaaay too low. I think the figure is closer to 80+ % as doctors, for the most part, are clueless about how much tests cost and they order them to give them cover from potential malpractice litigation.
Ask a health care provider how much something costs and you won’t get a straight answer. Usually the answer begins with, “who’s your insurance carrier?”
Medical doctors don’t try to make a buck any way they can? Probably in their minds but if they are working in some clinic they better! Our medical system including mental health and non profits are completely profit driven. Any time we step into any medical establishment we are taking a shot at being a number with a dollar value on it and that will be the driving force behind our care.
You can sue your doctor or your lawyer for malpractice, right? Has anyone ever won a lawsuit against their realtoR or mortgage broker?
Congress I can’t help you with, but at least they don’t directly handle your personal affairs.
That is why the RE professional pays a hefty E & O, errors/ommisions insurance premium. Yes, you can sue, and probably as easy as it is to sue a md/lawyer. How easy is that? I don’t know, but my 8 ball tells me, heck, I forgot, what do 8 balls say again?
Desertdweller: Sure you can sue. But if you’re dealing with a roughly $25K bill for soil remediation around a concealed, leaking underground oil tank, then you’re not going to get a lawyer to take it on a contingency basis. So you either pay by the hour or do it by yourself, pro se. I’m pretty sure I have six years to go pro se with a fraud suit here in NJ against the realtors and mortgage broker who stuck me with the broker’s “flip” over an oil tank. Before that limitations period gets close to the end, though, I hope to inflict on the realtors’ office lost business to the tune of at least $25K. I intend to do this by spreading the word on the realtor who really stuck it to me and my wife. His name is Mark Arbeit, from Margate, NJ, and you can check out his website at markattheshore.com. He blew into town about three years ago and, like most carpetbaggers, seems to believe he’s more clever, powerful and popular than any of us peons who have lived here all our lives. I guess we’ll see.
Sounds like the carpetbagger was good enough to get you. New Jersey? Why not just settle it with a baseball bat? I thought that was how all disputes were settled in the Superfund State.
Don’t think I haven’t thought about it. I’d much rather have a few good friends in low places than many superficial friends in high places.
Sue for what, opening the door incorrectly? They are not your financial advisor, appraiser, attorney or inspector. They just run a search every now and then on the internet, drive you around, unlock the door, make a few mindless comments (such as nice paint color or carpet - i.e., most inexpensive things to change that most ppl change anyway), and fill out some form paper work (God forbid you ask them how the forms work or for a change).
Yo, Tim: I said it was a long tale of woe. Involves, among other things: standard NJ seller’s disclosure form, which covers tanks and they won’t turn over; list of smarter prospective buyers, who had been through the place and doubtlessly discovered tank in tiny, walled-off shed, back-to-back with the main shed; and MLS description doctored mid-way through listing to eliminate description of property as containing two sheds. Am I an idiot? OK. But even idiots can complain about fraud and some do it successfully. Maybe I will, maybe I won’t
I’m sure you think you’d do very well swimming with the sharks, and I’m also sure you would. I didn’t. They did a lot more than just tell me “kitchen to the left, powder room to the right.” But, hey, throw in your lot with the realtors.
I wasn’t implying anything about your situation nor even responding thereto, just that you need to prove a duty and breach thereof to win, and real estate agents have not been found to have many duties. I didn’t say it was good or bad, just what it is. Was the disclosure ever delivered? If so, what did it say in this regard? Did you have your own agent? I did a quick internet search and the small claims max in NJ appears to be 5k, you might want to see if that was raised, it’s a faster and easier process with little cost.
Tim, Didn’t mean to be prickly. Sorry. I.m just embarrassed to have been taken.
No worries. Fraud is a different story altogether. Have you sent demand letters to everyone involved (i.e., setting forth what happened, that you got stuck with a bill of $x, and if they don’t pay you intend to see pursue your legal rights) via certified mail? I would also have them indentify their insurance carriers with contact information in the letter.
One more time, Tim. Sure, I’ve made demands. The responses all around are to the effect, “Go pound sand. We’ll talk if and when litigation is ever commenced.” One party’s lawyer informed me he was ready to talk but only just to say his client would pay a pittance to make us go away. I’ll bide my time for now and seek just to raise havoc via word-of-mouth. As I indicate below, I do have some really nasty dope on two of the playas and intend to make the most of it. I think they’re still of the opinion that only realtors and their lawyers are allowed to be vindictive, ruthless and recklessly cruel.
I would love for realtors to have to pay back their commissions if the houses they sell goes into foreclosure within 2 years.
And make it non dis-chargeable like student loans if they file for bankruptcy.
I might take that offer .. as long as you give me Power of Attorney over your financial affairs.
I’ll need to track and probably control your spending to some degree.. make sure you pay your bills and don’t waste money… all for my own protection, of course.
Joey…that’s what due diligence is for, it would thin the ranks real fast of agents and brokers, but truthfully now that the no money down era/ no doc loans are over for a generation. The people left to buy are being put through the wringer.
In the end it would probably affect very few agents, but it would keep the dishonesty to a very minimal level, knowing what could happen if you had the attitude of just making the numbers “work”.
Should we regulate and control one type of private enterprise salesperson and ignore the others? There’s nothing special about a used house salesperson. There is something different about the product they sell. The difference is that the product is hugely expensive.
However, there already exist far more regulations and controls on the sale of RE than on any other product.. except maybe yellow cake.. and SAMs.. but I’m guessing.
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OK.. So, I’m a crooked agent and I sell 50 houses a month. I will return a commission as agreed, but I still don’t care if they default. Why? Because maybe 3 or 4 or 10 of the 50 will default and I still come out ahead in the long run, because my honest competitors restrict their sales only to honest deals and qualified buyers, in fear of losing that commission.
———-
Here’s the thing as I see it.. bottom line. Who should be responsible for our actions? Who should suffer when we screw up?
We could relegate that responsibility to government, and often do. It’s very tempting. We spread the blame (and the comeuppance) among fellow citizens.The downside is the government tightens it’s grip on our lives when we ask it to make decisions for us.
I don’t want to feel safe and confident and assured by guarantees or promises of rebates when entrusting my fate to some salesperson. I want to be nervous and scared. The guy might be bound to repay the commission, but he could also be a freakin idiot I shouldn’t trust to wash my car, much less calculate my ability to to repay a mortgage.
I prefer to do my homework and be extremely careful when making big decisions that affect me far more than they affect anyone else. A returned commission (or a jailed salesman, banker or builder) is little comfort when your economic life is totally screwed and you’re packing your stuff into the station wagon.. Buyer beware.
Good points Joey, but couple the refund with non dischargable and it will affect their credit and ability to buy their house unless its paid in cash. So the bite is not in the refund its the non discharge in BK that i like.
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Why? Because maybe 3 or 4 or 10 of the 50 will default and I still come out ahead in the long run
Commission sales invite unethical behavior. You might work day and night but you must make that sale or you don’t eat. Almost every sale requires some element of coercion.. call it “salesmanship”… while the motive and urge to step over the line is constantly staring you in the face.
If i had to choose a method, the way I’d assure a supply of honest RE agents is to pay salaries or pay by the hour, or by the job. Time and materials.
Take away the pressure to either make a sale or starve. Remove all incentive to lie or cheat or collude. Make the job boring and unappealing to ambitious thieves and schemers.
Plenty of other services are salaried for this reason. I don’t see why it wouldn’t work in sales.
NAR and the independents will suffer through some serious changes before this is all over. Some changes will be forced on them, and a variation of non-commission sales might be one..
Again joey, i agree But look at CL Monster and other job sites and we are headed to a commission only America. The real jobs with a stated pay ( even min. wage) are getting fewer and far between.
Just think if you were looking for a lawyer’s job and 90% of the ads were contingency only, and the other 10% never answer you….. What would you do?
This is a bad time to be job hunting. The economy is sick. I don’t think today’s job market conditions are applicable to anything beyond the current crappy economy and job market.
Back to re agent pay..
It’s bad enough that commission sales put you in a position where you either sell or die. Add to that the fact that the larger the sale price you can negotiate, the larger your commission.
Does anybody besides me see why RE agents might be inclined to be a little less than honest at every step in the process? straw buyers.. fake appraisals.. all efforts aimed at jacking up price..
Maybe just taking sales price out of the commission-equation would remove most temptation..
Now THAT is a good idea.
but like joey says, only if you paid all ‘your’ bills on time etc.
Just cause ‘you’ skrooed up and bought an overpriced roof, doesn’t mean the re has to pay for ‘your’ fate 2 yrs down the line.
If you rely on Realtors to tell you how much you can afford or make economic forecasts you really aren’t fit to make big decisions such as buying homes. I don’t think most Realtors are dishonest, but really believe they are just kind of dumb and clueless when it comes to real estate. It is not like there are any meaningful barriers to entry. No different than selling used cars or Sham-Wows.
The amount of mortgage fraud and straw buyers on Ocean Blvd. in Long Beach CA skewed the sales by hundreds of thousand dollars.
The comps on these bad sales were used up and down Ocean.
I wonder how the real buyers will feel when they find out that the “Values” on there purchases were based on fraud.
In fairness to realtors, the NAR and its ilk are probably no better or no worse than many other professions when it comes to gaming the system or a win-at-any-cost mentality. Over the past couple of decades it seems like an “I got mine” ethos outweighs any quaint nations of honor or decency. Look at the members of our Republicrat political class, for sale to the highest bidder. Look at the media moguls and journalists who turn a blind eye to news that doesn’t fit the agendas they’re pushing. Look at the millions of citizens who signed mortgages they couldn’t afford, based on greed-driven assumptions that “housing only goes up.” Look at the “bodyguard of lies” that go us into Vietnam and Iraq.
Accountability, and consequences, have been so universally lacking for so long that it’s no wonder the typical NARster, “hit the numbers” appraiser, or mortgage broker would fall back on the “I just did what everyone else was doing” defense. The real problem isn’t the NAR. The real problem is that the great mass of Americans have become so accepting or indifferent when it comes to lies and fraud, except when they become directly victimized.
Can’t add to that. AMEN Sammy.
Nailed it.
+100
“(A) lot of felons do become repeat offenders.” I’ll say! I have a long, sorry tale of woe that began right around the time I stumbled upon HBB. One of these days I’ll lay it out if anyone’s interested. For now, though, I’ll write just that two of the actors in this tale are convicts: Gary Diamond, a NJ licensed “Mortgage Solicitor,” about whom you can read on the Florida Dept. of Corrections website (hit Supervised Offenders); and Mark Arbeit, a licensed NJ Real Estate Salesperson, about whom you can read in The Washington Post archives for June 20 and 25, 1987 (the free preview is enough to give you the gist). I’ve been ranting and raving about these fraudsters to NJ’s Department of Banking and Insurance for more than one year; must have three dozen hits on them in “Rate My Realtor”-type sites around the web. Nothing seems to work. They’re both out there laughing and making as much money in the market on the way down as they did on its way up.
My name’s still a punchline between these high-fivin’, high-flyin’ jokers, and among all their thievin’, lyin’ REIC pals. But I’m intent on getting out the word on them. We’ll see who laughs last.
JimboAC
Mr. D use to whistle “If I only had a brain” around my desk. Looks like I have the bigger brain that was able to find him months ago on his new FL site. Now he needs to put his name on his new NJ site.
Someone will be getting in touch with him! I now work with a team of people that keep track of people that don’t have a brain and make really stupid mistakes!
Did he think he would fly under the radar with a bright yellow shirt!
Yes! Tonight’s COPS was filmed in Tampa.
I thought I was the only one that took pride seeing my hometown on Cops!!!
Realtor agents were just as corrupt as the brokers. They delt it. I smelt. And sad enough I bought it. Nothing left to say. They lied.
I am puzzled. Historically, home prices go up 3-5% per year. Many cities had 10% per annum or greater gains year over year, while incomes only went up 3%. We also had historically low interest rates that were bound to rise. People were buying homes they couldn’t afford. This was all public information which could lead to only one conclusion. Now if they changed the documents after you signed them, or lied about the terms, that might be a different story, but if we are just talking about prices being over valued, you have to do you own due dilgence before making a major purchase. There was no evidence at all that post 2001 prices were sustainable and a mountain of evidence to the contrary. Didn’t you know that prices were substantially less a few years earlier and that there was no meaningful rise in personal income? If not, why didn’t you ask? Some ppl put more thought into buying a toaster.
“Freddie Mac announced Wednesday that it would offer loan-to-value ratios on home mortgage refinancings of up to 125 percent for qualified borrowers.
Fannie Mae also announced a similar change. The moves come as the Obama administration raised the maximum loan-to-value (LTV) ratio from 105 percent.”
http://washington.bizjournals.com/washington/stories/2009/06/29/daily58.html
“The National Association of Realtors (NAR) and the National Association of Mortgage Brokers (NAMB) have been lobbying hard to prevent, delay, and reverse any legislation that would give government regulators more sway over the real estate industry.”
The consumer does not buy the garbage put out by the NAR and NAMB. Where was the NAMB when Florida discovered more than 10,000 licensed mortgage brokers were convicted felons that should not have received a license in Florida? So much for the hype by the NAR and NAMB that they can self police their members!