Frauds Pump Air into Real Estate Bubble

Oregon Live ^ | 9/27/2006 | S. Renee Mitchell

[ex-Texan]

Indeed, all indications predict that it's a matter of when, not if, this country will once again witness the fall of the house that greed built.

Mortgage fraud is just the tip of the iceberg. Organized crime has infected the mortgage industry. Billions are being laundered through loans on inflated real estate. [Learn More?]"Nothing to see here. Lock your doors and windows. Time to move on."

[BookaT]

Wow kind of like approving loans for developments for people you know wont be able to pay for it.

WhiteWater anyone?

[ex-Texan]

Mortgage fraud continues to escalate in Southern California, FBI figures show, raising concerns of increased defaults and foreclosures as the housing market cools down.

Lenders filed 4,228 reports of suspicious activity in the region during the first 11 months of the government's fiscal year, which ends Saturday, the FBI said. That puts 2006 on track to nearly double last year's total.

[samson1097]

I'm short on knowledge about real-estate and the mortgage industry. Could somebody please break down what these guys were doing and what about it was illegal?

[GodGunsGuts]

This is going to be big once the fit hits the shan!

[FReepaholic]

...housing prices are doubling in a matter of months...

But wait....I thought the bubble had burst!

[misterrob]

Blog Pimpin Ain't Easy

[stylin19a]

It reminds me," Caldwell says, "of the savings and loan crisis."

Good Point ! unfortunately, it proves nothing.
The S & L's were decimated.
The RTC was selling real-estate pennies on the 10 dollars.
A lot of people got hurt...the sky was truly falling

Guess what ? NOT !!! Sky didn't fall, and here we are, in a cycle turning downward, after 5-8-10 years of great growth.

[Justice]

[AdamSelene235]

The S & L's were decimated. Guess what ? NOT !!! Sky didn't fall, and

The GSE problems are orders of magnitude larger than the S&L bailout.

[green iguana]

I'm confused... how does one illegally sell a house for $100,000 over it's $350,000 worth? Unwilling buyer? Gun to the head? A forced market aot a free market? A little color please.

[Hydroshock]

When you lie and the mortgage broker knows you lied to get that load it is fraud and a crime.

[flushing_kenny]

The seller gets more money, the buyer, who often has no intention of repaying the loan, may get a little kickback from the seller (thus, the 2 accounts opened by a relative of the buyer). Once the buyer stops paying on the loan and hits the escape clause (fleeing or the use of falsely filed paperwork), the bank is out the money and can only recover the true value of the house.

[ex-Texan]

Wall Street Journal Video on Mortgage Fraud: Hit the second link.

I'm getting lots of flack by the naysayers today. Just like a B-17 flying over Nazi Germany. The corrupt Axis of Evil: Organized crime, mortgage brokers and realtors.

[LowOiL]

One way I have heard is for the appraiser to over value the house for the dubious buyer, then when the seller sells it, he kicks back some dough to the appraiser.

[MarineBrat]

...They are accused of selling two Marine Drive homes at inflated prices so they could pocket the profits...

This doesn't make sense. What is illegal about asking for more than a house is worth?

[Mark was here]

In July, one of Oregon's most prolific con men, Clifford Brigham -- also known as C.J. and Cleveland -- and Melodie MacDuffee were indicted on charges that they allegedly defrauded lenders out of $5 million between October 2004 and August 2005. At the time, Brigham was on release from federal prison pending appeal of his 2003 conviction for another scheme.

Defrauded lenders? Isn't that like out conning a con man? When banks pay 1% on savings accounts and lend money out at 20 to 30% I'd say there is quite a con game going on.

[defenderSD]

"One house, at 13515 N.E. Marine Drive, was co-owned by Booth and Martin. It sold at about $100,000 more than its $350,000 market value. The other, next door at 13531 N.E. Marine Drive, was owned by Martin and another person. It sold for $50,000 more than its $350,000 value."

I don't understand how this could have happened. Who loaned the money to the buyer to pay prices way above market value? Why didn't the lender get an appraisal of the properties from a reputable appraiser before making these loans? This would never happen with any reputable lender who's running a professionally managed mortgage loan business.

[glorgau]

> how does one illegally sell a house for $100,000 over it's $350,000 worth?

Roughly, it's all about getting the loan with no intention of re-paying. In that scenario, the bigger the loan, the better.

[defenderSD]

That's why lenders must hire reputable appraisers from appraisal firms that have been in business for many years with a good reputation. Most big lenders only hire good appraisal firms because appraisals are a critical step in making good loans.