MortgageFraudBlog Conference - Day 2

Jeff - I do have those numbers somewhere - it's something like 20% overall but estimated to be as much as 60% of subprime mortgages written during the past 5 years. It's a staggering amount. What we're seeing is the tip of the iceberg because as much as we hear about all the foreclosures, still something like 70% of subprime and alt a mortgages are performing and people are paying their notes on time and will remain homeowners. We only find the inaccuracies when somebody defaults or applies for a short sale, refi or relief and the inconsistencies on their original application become evident. There simply isn't the time, manpower or will to evaluate all the mortgages - and as long as they're performing, who cares?

Dona - It might surprise you to know that this happens in ALL markets. I first heard about this at an FBI seminar at NAR about 5 or 6 years ago. At that time it was still a farily new phenomenon in California but I'll never forget the old hayseed Realtor from a small town in Virginia (no disrespect - he was a true old hayseed in overalls) who was almost in tears describing how it had decimated his small community of about 16,000 people. Median home value was only about $60,000 but the fraudsters moved in and started 'investing' in places and paying $90,000 to $110,000 for the homes. In less than a year they started going into default, the banks wouldn't lend money for people to buy them at their former prices, the median fell to around $45,000, the towns revenue dried up and they went BK - it was a sad story of a small town. I actually talked to 2 lenders from Ohio today who said they had to be extremely vigilant in their small community because it would actually take a much smaller scale scam to wreck their economy - no cushion.

While we don't have control over lenders after the sale, we are the ones who are often on the front lines when these scams show up. I remember when the overpriced offers started showing up in our community of 100,000 people - Realtors were the first to see it and the first to cry foul. We couldn't get law enforcement or lenders to do anythng until millions of dollars had already been lost. We truly are the front line for much of this - not that we're involved, we're just in a position to see it first. And unfortunately some of our members are also involved. 

Jeff - By the way, yes it is getting more difficult to pull some of these scams but not impossible. That's why they're constantly working new angles. The elimination of 'liar loans', NINA loans (no income, no assets) & NINJA (no income, no job) makes it tougher. The entire lending industry is in a state of flux right now with nobody knowing exactly where they're going to end up. The short term knee-jerk solutions will probably be too prohibitive so we'll get back to more 'old-fashioned' kind of lending for awhile - down payments, jobs, things like that. Then people will figure out how to game the new system, politicians will put a new type of community reinvestment act in place and in another 16 years or so, we'll repeat the whole cycle.

Lenn - part of pur obligation as Realtors is to educate our own  members as well as the public. Unfortunately we can't count on anybody else to do this so we have to rely on people like you in every market - people with integrity and who can recognizxe or smell these scams and the slime that perpetrate them. A lot of these people have been around for years just moving opportunistically from scam to scam & giving our industry a bad name. In CA may of the same people who were doing the pyramid buying scams have now switched over to become short-sale and pre-forecklosure consultants. It's handy because they have a ready made clientel - all the people they screwed getting them into these homes, they can now screw again on the way out.

Susan - that's is the scary part. You can do all the education you8 want but there are people that will sell their soul for $50 bucks. One of the things I'll be posting about later is the 'affinity scam' where these people target certain groups like their church groups, their own minority groups, a senior community etc. Just too many slime to keep up with and too many people who don't consider what they're doing to be fraud. It's just a little white lie and everybody else is doing it so how wrong can it be?

Thank you. In our area of SoCal, we have formed a Realtor Fraud Task Force with the mission to educate the public and our fellow Realtors. We know we can't eliminate the problem - there are always scammers and always people willing to be scammed, but if we can help a few honest people avoid getting taken advantage of - we will feel vindicated. Plus it gets the Realtor name out there in a very positive light in our community - and that kind of positive press is a real good thing to have right about now.