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Few Brokers Linked to Disproportionate Share of Foreclosures

By
Real Estate Agent with 1st Action Real Estate

One of our local writers for The Californian just did an excellent expose on some of the mortgage fraud that’s run rampant through our region for the past few years. Zach Fox and Chris Bagley at The Californian and Leslie Berkman at The Press Enterprise have done an exceptional job over the past couple years shining the light on these miscreants and helping educate the public about some of the scams that have invaded our communities.

In his latest piece, which is a very long read but very worthwhile, Zach talks about another affinity fraud linked to a handful of North San Diego County Brokers. While these 21 Brokers and agents make up only 2% of the volume sold during the past couple years, their combined number of foreclosures make up 11% of the total volume foe the region. Some of these agents have racked up foreclosure percentages of 45% to 60% and higher at a time when most brokers are averaging 2%.

I have excerpted some of Zach’s article but you can follow this link to read the entire piece. The Californian - HOUSING: Handful of brokers linked to glut of local foreclosures

A tiny number of real estate brokers is associated with an inordinately large number of foreclosures in North County, raising questions about how just a few salesmen could play a role in sending hundreds of families into foreclosure and causing millions of dollars in losses for lenders.

A North County Times investigation into thousands of foreclosure records, along with interviews with buyers, reveals a pattern that suggests some real estate agents specialized in clients ---- chiefly Latinos ---- who couldn't afford to buy homes, and helped them buy as many as possible.

"They are doing something that is severely inappropriate in order to have this high a number of foreclosures," said Tim Sandos, president of the National Association of Hispanic Real Estate Professionals. "It just doesn't pass the smell test."

Borrowers and real estate agents who used to work with at least two of the 21 high-foreclosure-rate offices said the salesmen would target low-income Latinos, posting fliers advocating homeownership in certain apartment complexes.
Then, at seminars, the agents would propose that buying multiple homes was the key to becoming rich.

The sales records of Romero, the Lopez brothers, Ramos and Castro ---- the four salesmen with ultrahigh foreclosure rates ---- had several similarities:
-- Essentially all the borrowers, 99 percent, had Latino surnames.
-- The majority of mortgages issued on the sales, 93 percent, carried no down payment.
-- The list of lenders on those mortgages reads like a graveyard of failed institutions, many of them exclusively subprime lenders: Washington Mutual, Argent Mortgage, Accredited Home Lenders and Fieldstone Mortgage.
Some, though not all, of the real estate agents sold multiple houses to the same person, with all of the purchases going to foreclosure in some cases.
Still, it is unclear how much involvement the real estate agents had in the loan origination process, where any misrepresentation of income ---- and therein, any fraud ---- would occur.

Although the perpetrators in the article are generally referred to as agents (as opposed to Realtors – you don’t have to be a Realtor to be licensed in California), it does cast a pall over the reputations of lenders and agents alike. And since most of the public does not differentiate between an agent practitioner and a Realtor, the negative impact on our industry and our reputation cannot be underestimated. Perhaps one of the most telling and saddest comments in the article comes from another agent in the area who said:

It is illegal to encourage homeowners to lie about their incomes. And it is the job of lenders to establish whether a buyer is likely to repay the mortgage.
Yet, the state Department of Real Estate's code of conduct says brokers are "fiduciaries of their clients," a relationship generally understood to mean that brokers must act in the best financial interests of their clients.
The obligation has been widely ignored for years, said Jim Klinge, a real estate agent in Carlsbad.
"It's mandated," he said, "but it's a fleeting thought."

Our fiduciary duty to our clients has become a ‘fleeting thought’. Damn. that’s a depressing commentary on the times, ain’t it? I can only hope most of us don’t harbor that sentiment and that those who do are booted unceremoniously from our ranks.

Realtors… We’re part of the solution, not part of the problem.

Comments(4)

Lenn Harley
Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate - Leesburg, VA
Real Estate Broker - Virginia & Maryland

I've always said that a simple piece of software in the hands of regulators could identify those financial entities that were doing what the North San Diego County Brokers did.

The were not uncovered because no one wanted to.  It was a matter of leadership. 

Jan 21, 2009 05:53 AM
Claudette Millette
The Buyers' Counsel - Ashland, MA
Buyer, Broker - Metrowest Mass

Gene, I share your sentiment that anyone who thinks our fiduciary responsibility is a "fleeting thought" should be booted out.  Your article is a good expose on some of the underbelly of our profession.

 

Jan 21, 2009 06:21 AM
John Walters
Frank Rubi Real Estate - Slidell, LA
Licensed in Louisiana

Gene just wanted to let you know my property taxes tripled this year from 2004.  I guess even my area can't resist legally stealing more money from us either.

Jan 21, 2009 07:20 AM
Mike Frazier
Carousel Realty of Dyer County - Dyersburg, TN
Northwest Tennessee Realtor

Gene,

We had about 3 companies here(fairly new companies) who sold almost all the b-paper loan deals. One has already gone out of business.

Jan 29, 2009 08:51 AM