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I'm Really Tired Of Hearing "Fraud"

I'm Really Tired Of Hearing "Fraud" by Bill Roberts

When people lose millions in the stock market because of market action, nobody is yelling "Fraud."

We're not talking about a particular stock, we're talking about the market.

A lot of what has happened in the real estate market is the result of market action.

It is about high risk scenarios, not-well-thought-out mortgage products, the un-warranted belief that the market only goes up, and the ill-timed actions of the Fed.

A well-respected Las Vegas Realtor® keeps saying "Fraud" whenever she sees a lot of foreclosures.

I don't think so.

Let me explain: I live in San Diego (350 miles due south of Las Vegas). While the "Boom" was going on many San Diegans were buying in LV.

Builders would "announce" a new tract and these San Diego "investors" would put in a reservation along with a small deposit. They expected to make thousands of dollars by the time their house was completed. They would then re-sell immediately upon completion. This strategy worked during the boom.

But when the market went flat these "investors" were stuck with their houses because they couldn't sell for enough to re-capture their costs.

The tragedy is that some builders sold everything to these out-of-area investors. Is it any surprise that whole sub-divisions are in foreclosure?

Some of these "investors" probably did commit mortgage fraud by stating on their loan application that they intended to occupy the house. Who knows? Maybe they did intend to occupy. And then some did occupy. Maybe they legally bought as an "investor." Loan programs were available where legitimate investors could buy with only 10% down. They had plenty of cash from the last house they "flipped."

And then some buyers actually moved into their new houses, but they couldn't really afford the monthly payments, taxes, insurance, HOA fees, and maintenance. They were "hoping" to re-finance into a "better" loan with better rate and terms.

But they couldn't re-finance. NO EQUITY.

BAD JUDGMENT does not equal FRAUD.

Prices are low enough in Las Vegas for FHA and conforming conventional loans. Little or no down payment is required for an owner occupier.

Rents are going up daily, Renters are being "squeezed."

Stop crying fraud and sell those houses to the renters. If they can afford the rent, they can afford the mortgage. FHA doesn't even require a good FICO score, just a demonstration that they pay their bills.

It might even make sense for San Diegans to return to Vegas for a second home.

The prognosis for the LV economy is excellent. Gambling, Entertainment, and Conventions still draw millions of visitors to Nevada every year.

Nevada is "Business Friendly." Land for business expansion is still relatively inexpensive.

Now is the time to BUY, BUY, BUY!

I am not licensed in Nevada but I would be happy to refer you to a trusted agent there. Give me a call. Bill Roberts 619-244-4610.

Posted by Bill Roberts - "Baby Boomer" Retirement Planning on 10/12/2007 04:11 PM

Comments (22)

real estate investment, bill roberts real estate, las vegas

22 Comments on I'm Really Tired Of Hearing "Fraud"

OCT

2007

I agree Bill. While I believe that there was significant fraud involved in many loan applications and approvals, the reasons folks purchased real estate in my market was to get a large home with a low interest rate or for investment purposes.

The buyers who were able to get their dream home and finance it with very low in interest rates in the 2003, 2004, years, are happy as they can be.

The buyers who speculated with equity money and purchased at the peak of the market or for quick resale are eating their purchases. I saw no fraud involved.

The states and feds are prosecuring fraudulent practitioners as we speak. Consumers who were not speculating are not claiming fraud.

Lenn, thank you very much for your comments. As Realtors we need to be a little more "positive" in our words and demeanor. Crying "Fraud" all the time is not doing any of us any good.

Bill Roberts

Man do I agree with that! YOU are right on. I hope people listen. Good luck!

Richard, thank you. I hope so too.

Bill Roberts

Bill

Interesting perspective. Out of curiosity: How do you explain current mortgage fraud statistics as they directly correlate to current foreclosure statistics? It would seem to me that mortgage fraud is alive and well in this country and has reached epidemic proportions.

Ed Ryb

Ed, Hi. Where have you been? I'm not saying that there hasn't been mortgage fraud, but it is not massive or prevalent. A lot of our woes can be laid at the feet on the Fed Chairman. There is an old saying that a rising tide lifts all boats. It is time for the tide to come in and lift us out of the muck.

Thanks for commenting.

Bill Roberts

Amen Bill. I've developed a DVD for realtors that talks about the many factors that led up to the "mortgage crisis." It's nice to hear a fresh perspective on the issue.

Dan

Bill

Stir the pot.....I think you're right on about the message we need to send as an industry, yet I believe that many people will not support you.

I deal with this daily....everyone has a story, which I believe is a major reason why everyone is screaming 'fraud'. I spent 90 minutes today discussing this very story with a major publication on the east coast, and they were just amazed at how many working parts comprise the industry.

They were able to acknowledge that fraud was only a tiny portion of the current market. You will see a piece towards the end of November regarding this very topic you just wrote about.

Dan, a lot has been said but the "negative" people just keep this rant going. We need a break. thanks for your kind words.

Bill Roberts

Bill

I've recently completed a lecture series that encompassed much of the mid-west and parts of the mid-Atlantic region. It's been a grinding agenda, but I finally have a couple of weeks off. A recently released study indicates that between August, 2006 and August, 2007, Nevada experienced an increase of 207% in its foreclosure rate. More startling is the fact that one in every 165 households in the state is currently in foreclosure. The numbers suggest that extremely potent forces are at play.

I agree that many of our problems have originated from the desk of the Fed Chairman. I'm currently reading Greenspan's recently released book and am surprised that he doesn't assume any responsibility for the current state of the economy. In my opinion, he improperly squelched market forces by lowing interest rates to ridiculously low levels for more than a decade. Bernanke, in my opinion, reacted in a cowardly fashion to a recent "wink" and "nod" from the oval office to lower rates for the sake of appearances. While it's true that consumers will feel good about spending during the holidays, little consideration is given to the inevitable elevation of inflationary pressures and the global devaluation of the US dollar. I have to wonder what we'll be paying for a gallon of milk or a loaf of bread six months from now.

I have a great deal of respect for your opinion and always enjoy debating substantive issues with you.

Welcome back Bill,

It is nice to hear from you. Good news doesn't sell papers they say, but we're not selling papers, we're selling real estate. We all need to get "on message."

I'll be looking for that "piece." Maybe you can tell me where to lok.

Thanks,

Bill Roberts

Ed, Thank you again for your kind words. There is no question that Nevada (specifically Las Vegas) is having problems. It seems that Nevada and Florida got the highest of the highs and are now experiencing the lowest of the lows.

In amongst all that activity there was undoubtedly mortgage fraud. But no matter how many loan apps were fraudulent, there were many, many more that weren't.

If the Fed had handled it a little better, we probably wouldn't be in this mess right now. At least not to the extent that we are.

I think our focus needs to be on going forward. We need a positive message. There are good opportunities available right now.

Bill Roberts

Bill- Great post with the truth! You know I stand with you on this one. I agree with Lenn and Ed. I wrote a post about Greenspan's responsibility in this housing bubble and crash. And you know we really feel it here. Fraud is an excuse. Reasons don't count. Accountability does. The wanna be investors had no business getting into the flipping business, they caught in it and now are paying the consequences of their actions and decisions. Katerina

OCT

2007

Katerina, The "truth" will prevail if we just keep hammering it. The "excuses" are just that. Since we know what happened and why, we should be able to fix it. Real estate is generally a very stable investment, but it is not something for "day traders." As a broker I resisted dealing with flippers in this last cycle. I don't like the flipper mentality. Investors I like, but real estate is a long-term investment by necessity. It takes time to re-capture transaction costs and it takes time to sell. It is not the stock market and shouldn't be treated that way.

Thank you for your comments and support.

Bill Roberts

Bill - I think there are way too many factors in play to jump right to fraud. Among these are lack of financial education and failure to plan even 2-3 years into the future. Many first-time buyers looked only as far as the day they would get their key, not at the financial ramifications of adjusting interest rates. Other buyers (and some investors) simply don't have the basic knowledge to understand the finacial effects of home ownership, including the potential risks of a declining market.

Las Vegas will add 25-30,000 hotel rooms in the next five years. Our downtown area is going through a $15 billion redevelopment plan including the exciting 61-acre Union Park project. The World Market Center (furniture) is building phase 3, and a huge Jewelry Mart is also in the works. All of these factors point to a promising future for our housing market. We just need to be sure this time around that people fully understand what it means to buy and own real estate.

John, the lessons will be short lived, unfortunately. But, no matter. We can make the best of it by buying now. Maybe they will learn from our example.

I too am very bullish on Las Vegas. I see opportunities, not problems.

Thanks for contributing to the conversation.

Bill Roberts

Bill: I was not trying to be negative when I have written several articles concerning the fraud in our market! All bad? Heck no but I am extremely concerned with the snowball effect that will happen from the fraud that has occurred and caused many (not all) foreclosures.

Builders may have woo'd San Diegans but out of state owners (second and vacation) and investment owners had more strict guidelines for a purchase contract on brand new homes. Many CCRs were written to protect the homes from quick flips because the BUILDERS lose $$$ if someone is able to turn around and sell the home at a large profit. Investors were locked out from MANY major (national) builders. The new tracts that I have noticed high incidences of foreclosure in where from (mainly) one major builder WHO REFUSED to sell to investors.

I second the notion from John that, since these tracts mainly consist of entry level homes, that perhaps it was many first time buyers. Knowing what I know about how builder's preferred lenders pushing stuff through, I am not surprised.

On the flip side, many of my renters are potential buyers. The main objections for renters credit problems, income qualifications, relocation (they aren't completely familiar with the area), home sellers that had several escrows fall out and hesitant to go into escrow on anything until their home is CLOSED and a sheriff's 5 day notice to vacate on their current rental prevent them from getting into a home NOW. I do work with several great lenders on here and we are working with many of my potential buyers that I have put into rental homes to put them into a position to purchase using a conforming loan in the near future.

This is my most humble rebuttal and you are most welcome to use my name. I love to hear differing opinions about what is going on in my market and I am NOT offended in any regard! I am just reporting what I am seeing and hearing now and as I mentioned in my first paragraph, I am EXTREMELY concerned about how a little snowball can turn into an avalanche. I have had people who bought at the top, never late, not in distressed concerned about the state of affairs and just MERELY thinking about letting it go back to the bank because they feel hopeless.

I am also concerned about the people who are trapped and then are in crazy short sale situations where they are being lowballed without their home even going on the market OR the Realtor not allowing anyone else in because they have a sweet dual going on and even double escrows (as Rey mentioned) have been resurrected.

Fraud bothers me, what else can I say?

As far as your stock market correlation: I am betting the likes of Martha Stewart and Kenneth Lay may possibly disagree with you. The feigned & fraudulent energy crisis of 2000-2001 is still being payed for by those of us that live out west and it's painful.

All I am asking for from that post is that our governor quits pandering the banks and that it would be wonderful for our Attorney General's office to create a whole website and phone line + staff to deal with complaints relating to real estate fraud. The whole story doesn't lie on any one party involved and there have GOT to be patterns out there that involve fraud. We need to let the market correct itself and we need to work harder on prosecuting the fraud (which is being done but not on a large enough basis) so history doesn't repeat itself again. That would be the BEST way to help this market correction. Then again, don't know if we have enough prison space available.

I think you were reading me from a different angle but we do agree in many respects believe it or not :)

Renee, I really appreciate your coming here to discuss this. I know we do agree on a lot of aspects of the situation. We both want your market to come back. We both see immense opportunities there now.

As Bill Nazur reports there will be a major story in November detailing the fact that fraud, while greater than usual is still a very small portion of the foreclosures.

We do have a foreclosure problem in several markets, which includes the Greater Las Vegas area.

What I want is for the rhetoric to be toned down. We don't need people yelling "fraud" from the rooftops. It is counter-productive. Don't curtail your efforts to bring the wrong-doers to the attention of law enforcement. Just do it quietly.

We really need stability in the marketplace, brought about by buyer confidence.

If we achieve that confidence the home owners you describe as feeling hopeless would probably benefit from a more stable environment.

Thank you for coming here and being so nice.

Bill Roberts

I do think it shouldn't be brushed under the rug and ignored also. I personally (and you respectfullly disagree with me) feel that it needs to be addressed. I also don't feel it is "negative" to get a little out of what I am seeing nor that I will attract the wrong individuals. Au contraire mon frere!

I have been amending my tag clouds and changing up my writing a bit since the end of August. I have one all cash in escrow and working several other all cash buyers who are ready NOW. What I have cut out is the baloney calls and inquiries because these "investors" know that I won't put up with their BS deals that I could lose my license over. I will not write a cash back deal unless is it contained in the main body of the contract. I will not play dirty games with people in distress. I received a call from an AR mortgage professional asking if I did short sale listings. I returned their call and said I would LOVE to do short sales *BUT* I had several criteria that must fit within the listing so the short sale can sell and go through in a timely manner. Here is some of the criteria: I won't list just so the seller can go back to the bank and show it is listed so they can prolong foreclosure, I won't list unless they have a short sale packet filled out immediately upon list, I won't list unless the house is on a keycall showing status. Do you think I received a phone call back? Nope. I am not in the business to hold inventory, I am in the business, as a professional to facilitate real estate transactions. I will not participate in fraudulent or borderline fraudulent tactics to procure a sale or a listing.

Is it all fraud? No! But if an active agent can run into a slippery slope each and every day by doing the BPO's, working with the renters or buyers, something is wrong. Real Estate professionals are doing all they can to make a quick buck these days and the fraud lives on from before then, then and now. If we don't do anything about it within the laws that ALREADY EXIST, when will it stop? I am not asking for extra laws, I am not asking for extra bailouts, I am asking for justice and for people to be aware of what is going on.

With my postings outlining certain situations, I am also attracting individuals in need of information, a real estate service or comfort. Why is it so bad to provide any of those three at this time?

Of 558797 condo, townhome, manufactured and single dwellings in our county tax records, there have been 252461 property transfers since our heated market in April of 2004. That is ALOT of property transfers in relation to the amount of property. Of course, not all are in distress, not all financed with 100% or subprime loans. Bring into the amount of people who bought prior and refinanced to their eyeballs since that April 2004 number and couple that with declining property values and you can see what I am saying about a snowball turning into an avalanche. People will be more likely to "walk away" from their property and just let it go back if they feel hopeless. If they realize there is something they can do and proactively do something about it (note modification, complaints to local authorities when needed) maybe we can see LESS of a loss.

We cannot achieve buyer confidence just by being hunky doory positive all the time also. Buyers know what is going on and they want to make sure they are getting a good deal. If they feel like they are being screwed because of all the fraud in the market but don't completely understand it, they aren't going to buy. You explain a little something to them, and they are confident again.

Out of the mid 200 ish posts I have written, only about 10 have outlined fraud. Most of my consumer posts are in regards to statistics on what markets are hot and what markets are not. They also talk about how bullish I am in regards to this valley also.

People are hurting, and they honestly don't know what to do about it Bill. My 2 cents :)

OCT

2007

Renee, You miss read me completely. I don't want anything "swept under the rug." I want any and all wrong-doing to see the full light of day.

Also, I want you to be very successful during this time of up-heaval in your market.

As for the amount of property sold since April, 2004 that is normal. The "average" time people generally own real estate is five years. That means since April, 2004 (three and a half years ago) 70% of all property should have sold once (558787 times 70% = 391,158) so your number is actually a little low.

I would hope that you could be "positive" about the opportunity to invest in Vegas right now. It's a great place with a tremendous future and the prices are low. Yhat "exercise" you went through with Brian Brady might have skewed your thinking on this. I hope not. Those "numbers guys" have only one view point. There is a lot more to the Las Vegas Valley than that. Some of those areas with great numbers will never be what LV is, and is becoming.

As for short sales, I've written extensively on the subject. Almost all of it counselling real estate agents to not become involved. See Short Sales - Who Wins and Who Loses? , Short Sales - Not the Last Word , Short Sales Revisited Again, Short Sales Revisited.

As for the hurt some of it will go away when the market "recovers." That's our job to help it recover, and to make a buck in the process.

I don't know why you think that "exercise" I went through with BB would have skewed my thinking on investors. One thing about me, I form my own opinion and one of my last statements in that blog post which was Monday AM of last week said that their line of thinking will provide even MORE opportunity here. I even got a call from one of the guys all worked up saying he has a "fence around Las Vegas" for his clients. Uh, ok.

Like I said Bill, I rarely get offended and I am sure you really care for me and my continued success throughout this correction. I was offended when you focus on 10 (take away 2-3 as member's only posts) vs 261 posts. There were plenty of people you could have singled out or thrown in as a whole but you chose me. I will always have my paranoid eyebrow raised at you whenever I see you around the rain.

Not only do I want to help the recovery along, it is imperative that people KNOW there are options OTHER than foreclosure or selling short. The more people who want to throw in the towel before it is even wet, will keep us from getting where we need to go.

Yes, I would like to make a buck or two in the process but I will not compromise my integrity in the meantime!

Renee, I didn't single you out. I read your blog! in fact I subscribe to it. I didn't do any searches for "fraud" posts before I wrote this. It is just how I feel about the effect of our words on the public's perception. We need to be responsible in what we do.

Good luck to you.

I wish you would read my short sale posts. You might derive some benefit, but it sounds like you are already on firm ground there.

Bill Roberts

BTW I had "clients" early on buying new construction in Vegas to flip so I know it was going on. Maybe some of the builders got smart later.

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