The New York Times is reporting that in several cities officials can’t keep up on mortgage fraud investigation cases.

The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said.

…

“I don’t think any law enforcement agency can keep up with mortgage fraud, because it’s such a growth industry,” said Chuck Cross, vice president of mortgage regulatory policy for the conference of state bank supervisors, an organization of regulators and bankers. “There’s too many cases, not enough agents.”

Mortgage fraud covers crimes like false statements on mortgage applications and elaborate “flipping” schemes that involve multiple properties and corrupt appraisers, title companies and straw buyers.

In one common flipping plot, someone buys a house, has it appraised for more than its true value and sells it to a straw buyer for the inflated price, pocketing the difference. The straw buyer lets the house fall into foreclosure, leaving the bank with the loss.

Why wouldn’t banks go after any money from the straw buyer? If the laws are written so you can simply walk away from a house without having to pay anything back, then we’re likely to see more and more fraud schemes revealed.

Kool-Aid, Real Estate | No Comments »

In our last post, we hinted at some discussion that this bubble is bigger than anyone had expected. After a weekend skiing in Utah, the KoolAidMan still couldn’t get away from Real Estate!

Throughout the day, several people had been discussing Real Estate. In the lodge restaurant, there was a table of three or four Realtors on their weekend ski adventure, enjoying their lunch and talking about how much money they made in the past few years (who openly talks about how much money they make?) and how things just keep going up and up. Later in the day, on more than one occasion, discussions were overheard with things like “I bought my PC (Park City) house in 98 for $250K and now it’s worth $1.5M. I’m trying to sell it now and that’ll be my retirement!”

We’re at a point where we’ve never been in history; we’re in uncharted territory. Who knows what’s going to happen. The only thing that is certain is that people are still drinking Kool-Aid and only listening to what they want to hear.

Kool-Aid, Real Estate | 2 Comments »

During the run-up days of the bubble, many buyers were defending their high priced purchases saying ‘things are different this time’ along with the usual defenses that ‘they aren’t making any more land’ and ‘real estate always goes up.’ Well things are different this time.

I’m not claiming this as an original idea, but this housing downturn will be different than previous downturns. Aside from loose lending and crazy mortgages, there’s a lot more open access to information now than there ever was. The last major slide in housing occurred in the early 1990s. In the early 1990s, the internet was still in its infancy for the most part. There was no such thing as a blog. If you wanted to buy a house, your knowledge of the Real Estate markets was limited to what you saw on TV or read in a newspaper. The other major source of information was from the agents themselves (can we say conflict of interest?).

This day in age, the average person has access to so much information related to real estate and the markets in general. There are blogs from people all over the country that show the true state of local markets, showing what is really going on.

We stumbled across a post on a blog called DeansGuide that discusses why Real Estate Agents (or their brokers) should blog, and how it can positively impact their business.

The power of this blogging platform and strategy will change the face of the real estate industry as you know it now. The era of your local newspaper and magazine listings, photos, and ads is quickly being overtaken by the explosion of online blogs with rich consumer-user experiences.

The blog or blog network drives information to consumers, consumers can directly communicate and collaborate with the author(s) of the blog or blog network, and the blogger(s) are able to instantly measure their target’s feedback and reading habits.

Things are different this time, and any business involved in the Real Estate industry needs to adapt to this dynamic environment.

Kool-Aid, Real Estate | 3 Comments »

CNN is reporting that there will soon be an agreement to help thousands of homeowners avoid mortgage defaults by temporarily freezing interest rates.

Paulson told a national housing conference that this effort involved a “pragmatic response” to current realities as the economy goes through the worst housing slump in more than two decades. The number of homeowners struggling to meet higher payments because their initial introductory rates are resetting is currently soaring.

Why didn’t anyone see this coming? The biggest housing boom in history is now being followed by the ‘worst housing slump in more than two decades.‘

“We are working aggressively and quickly, utilizing available tools and creating new ones, to help financially responsible but struggling homeowners,” Paulson said in a speech to a national housing conference sponsored by the Office of Thrift Supervision.

A financially responsible person shouldn’t be a “struggling homeowner”. There are exceptions, however in most cases a financially responsible individual knows better than to take a mortgage that he can’t pay off. Don’t buy what you can’t afford, and don’t pay ridiculous asking prices just to ‘get in the market before it’s too late.’

• Q: “But what about the financially responsible individual with an interest only loan, who is now stuck with rising rates?”
• A: That’s the risk you take when you get an adjustable rate loan. A financially responsible individual should have enough sense to consider that risk when making a decision.

Will a Fed interest rate freeze cut really save the housing market? The short answer is no, with the reason being that banks are worried with under-performing mortgage backed securities, and they need to charge a premium on the rates they’re offering to mitigate their risk.

Interest Rates, Kool-Aid, Economy, Real Estate | No Comments »