"From Dreams To Debt" (Massive Mortgage/Real Estate Fraud Exposed In Southern California)

The Press-Enterprise ^ | Saturday, November 17, 2007 | LESLIE BERKMAN

[DogByte6RER]

From dreams to debt

Investors say they expected to cash in on the hot real estate market when they entrusted money to a company in Murrieta. Instead, many are losing their homes and facing bankruptcy.

03:08 PM PST on Saturday, November 17, 2007

By LESLIE BERKMAN The Press-Enterprise

Video: Anna Richter talks about losing money in the investment scheme

Residents of Copper Canyon in Murrieta watched in astonishment as a group of investors snapped up homes in their middle-income community last year, paying $50,000 to $100,000 more than the sellers wanted.

Today, the front yards are browning, overgrown with weeds. Many of the houses are empty. Owners have put up for-sale signs to lure buyers before the houses are auctioned on the courthouse steps or seized by lenders. Many are in foreclosure.

Such properties, strewn across southwestern Riverside County, are the most visible fallout from a real estate scheme that recruited hundreds of investors in at least six states who wanted to cash in on the hot housing market. Many of those investors instead find themselves facing foreclosure or bankruptcy. Some have lost their family homes.

The U.S. Securities and Exchange Commission and the Riverside County district attorney's office are investigating Pacific Wealth and the men behind it. Investors said they also have been interviewed by agents of the FBI, the Secret Service and the California Department of Corporations, but those agencies declined to explain their role in any probe. No criminal charges have been filed.

Investors who have lost an estimated $200 million in cash and equity have joined in five lawsuits that allege fraud and unfair business practices.

The trust that was a cornerstone of the scheme is broken.

[mewzilla]

"It is a principle in California law that you cannot accuse someone of defrauding you if you were a willing participant," Grossman said.

IOW, you can't con an honest man.

[cgbg]

The entire southern california real estate market is one big ponzi scheme. Unfortunately more than a few Socal freepers have fallen for the scam.

It is very difficult to con someone who is not greedy.

(I noticed when I lived in Socal the mere mention of real estate would send the natives drooling and bragging about how rich they were. Those who sold out and got out in time did well--just as in any Ponzi scheme.)

[jwparkerjr]

Did you see the recent stories about how because of the new bankruptcy laws lots of people are choosing to let their house go back and pay on their credit cards? Talk about the law of unintended consequences!

[Cringing Negativism Network]

You pays your money.

You takes your chances.

Investments really can only go up, or they can go down.

If you buy a mutual fund. It can go up, or it can go down. If you buy that mutual fund on margin, you can lose a lot of money, if it goes down.

Same with real estate.

Buying a house, with a no-down mortgage, is like buying equities on margin.

Except, without the margin requirement.

A lot of people, decided eventually after watching real estate soar skyward year after year, after year, while their friends and co-workers mentioned how many millions of dollars (literally) they were now worth simply from rampant real-estate value appreciation.

And they finally. In desperation, and with clouded judgement, concluded they would never be able to buy anything ever, unless they hurried up and did so RIGHT NOW.

Buying ... right at the top.

It’s sad so many didn’t remember, whenever there appears to be a “new paradigm”, it always means, a bubble is about to burst.

Now it has.

Investments now, are going down.

That happens.

Investments which never go down, are not investments.

They’re called welfare.

[jwparkerjr]

re: American simply paid off their debt at unprecedented rates and spent right through a predicted recession

Lots of people did that mortgaging their homes and transferring that unsecured debt to their property, frequently at abnormally low rates that have since risen, in some cases dramatically. To make matters worse they refinanced based on inflated property values brought about by the speculators. Now their property isn’t worth what it would take to pay off the mortgage.

This time they will have no option to shift the debts and they will have to face the music.

[STONEWALLS]

“Did you see the recent stories about how because of the new bankruptcy laws lots of people are choosing to let their house go back and pay on their credit cards? Talk about the law of unintended consequences!”

....seems like I remember Congress tightening up the bankruptcy law a couple years ago after heavy lobbying by the banks (to defend their lucrative credit card biz of course)....from your post it looks like that law change is coming around to bite the banks on the butt!...

[STONEWALLS]

“Lots of people did that mortgaging their homes and transferring that unsecured debt to their property...”

exactly!....who among us doesn’t know someone who did a “cash-out” re-fi so they could pay down credit card debt....some folks did it more than once too....using their home like an ATM machine....and of course, that mortgage interest was a deduction come tax time...a feature that the mortgage industry used as a selling point.

[Freedom_Is_Not_Free]

Sorry, no sympathy at all. Boom times always bring out shysters looking to scam innocent people. The smart innocent people say “if it seems too good to be to be true, it is.” The dumb innocent people get greedy and talk themselves into being taken by these “can’t miss” deals. All the warning signs were there.

They just got greedy. They got tired of working hard and saving and wanted the quick easy kill. They wanted something for nothing and fell for the promise for it. Greed will get you every time. I hope they learned way you don’t get something for nothing. Sorry they had to learn the hard way. Just hope the shysters do real time.

[Freedom_Is_Not_Free]

Thanks for the script. They wouldn’t have got 4 lines in before I slammed the phone down. Snake oil pure and simple. Anybody who bought that line was either dumb or so greedy they had no problem deluding themselves this was a good investment.

[Freedom_Is_Not_Free]

Funny how everybody cites leverage as a huge benefit of buying a house, as if leverage only works when houses appreciate. Nobody ever wants to discuss the potential losses from a leveraged home loan when house values fall.

[B4Ranch]

There’s a reason that the Seven Deadly Sins have that name.

[ex-Texan]

Have you seen the cover of The Economist? You people really ought to get out and browse the shopping malls more often . . .

Recession in America Looks Increasingly Likely

There Are Reasons Why People Are Not Making Mortgage Payments

Click the map for the source. Learn more.

Looks to me like the foreclosure map above shows the whole economy is stumbling except for the West Coast. Has California been keeping the rest of nation afloat?

Well, nevermind. All that is about to change . . .

Californians Warned of Coming Recession Based on Employment Data

Excerpts:

The slumping housing market led to thousands of job losses throughout California last month, prompting fears that the state and local economies are lurching into a recession.

California lost 15,800 jobs and San Diego County lost 1,700 in October, according to seasonally adjusted data released yesterday by the state Economic Development Department.

Payrolls at nine of the 11 major industries in the state fell last month, led by construction, which lost 4,200 jobs. The only industries to gain workers were professional and business services and educational and health services. * * *

[DogByte6RER]

From: http://deadlysins.com/sins/

Pride is excessive belief in one’s own abilities, that interferes with the individual’s recognition of the grace of God. It has been called the sin from which all others arise. Pride is also known as Vanity.

Envy is the desire for others’ traits, status, abilities, or situation.

Gluttony is an inordinate desire to consume more than that which one requires.

Lust is an inordinate craving for the pleasures of the body.

Anger is manifested in the individual who spurns love and opts instead for fury. It is also known as Wrath.

Greed is the desire for material wealth or gain, ignoring the realm of the spiritual. It is also called Avarice or Covetousness.

Sloth is the avoidance of physical or spiritual work.

GREED - “Sinopsis”

What it is: Greed is the desire for material wealth or gain, ignoring the realm of the spiritual. It is also called Avarice or Covetousness.

Why you do it: You live in possibly the most pampered, consumerist society since the Roman Empire.

Your punishment in Hell will be: You’ll be boiled alive in oil. Bear in mind that it’s the finest, most luxurious boiling oil that money can buy, but it’s still boiling.

Associated symbols & suchlike: Greed is linked with the frog and the color yellow.

Medieval theologian Thomas Aquinas said of Greed: “it is a sin directly against one’s neighbor, since one man cannot over-abound in external riches, without another man lacking them... it is a sin against God, just as all mortal sins, inasmuch as man contemns things eternal for the sake of temporal things.” (2, 118, ad 1)

[Lancey Howard]

Grifters and con artists only succeed with greedy people.

[stephenjohnbanker]

You and I aren’t getting flamed like we were 1 1/2 years ago.

[ex-Texan]

Yeah, I know . . . Perhaps people throwing out lies and insults lost their jobs -- in the mortgage lending and real estate industry? Making derogatory comments is a way of life for some people. They climb to success on the backs of others who do all the work.

On a different note:

The passing of time is like the passing of two trains: when you are young the other train is approaching at almost the same speed. Time seems to stand still and hangs on your hands. You grow older and the trains gain speed. Then time is rushing by faster and faster until it's gone. Suddenly, you see the green countryside again. . . . You see leaves wiggling in the wind and notice rain drops glimmering or the bright glow of hoarfrost in the early morning. Spiders webs of bright color gleam everywhere.

As you near the end of the line . . . You wake up. Everything that you knew and worked very hard for all your life was an illusion. The importance of money evaporates like mist in the morning.

Thanksgiving is upon us. Everybody needs to hug their spouses and their children more often.

[stephenjohnbanker]

“As you near the end of the line . . . You wake up. Everything that you knew and worked very hard for all your life was an illusion. The importance of money evaporates like mist in the morning.

Thanksgiving is upon us. Everybody needs to hug their spouses and their children more often.”

Happy Thanksgiving to a man who knows what to value in life!

[radiohead]

Thanksgiving is upon us. Everybody needs to hug their spouses and their children more often.

Amen, my FRiend.

[radiohead]

I’ve been spending some time reading the Bubble Markets Inventory Traffic linked on the site you suggested. Jeez louise. I just have to shake my head at paying so much money (and w/such shakey loans) for so little house, or going into bankruptcy over a house you shouldn’t have had in the first place.

I won’t make fun of people’s personal tragedies, but taken as a whole, how did people let themselves get snookered in these markets? Does housing cost more now than it used to? Yes. Within a given period of time, will housing always go up? No. Maybe instead of prayer in schools, we should be lobbying for mandatory courses in economics.

[redgolum]

And it just isn’t going to hit California.