Wednesday Morning: Is There Real Estate Fraud in LA?
Good morning. I hear a lot of stories about real estate fraud in Los Angeles -- like the cash-back-at-closing scheme, in which the borrower gets the cash back, never opens the door of the house, never makes a single mortgage payment, and walks away with the cash. But I don't hear a lot about real estate fraud investigations or prosecutions. Maybe I'm not listening carefully enough.
I'm waiting for a California official to do what the Attorney General in New York is doing -- that is, start making some noise about fraud. Andrew Cuomo has been sending out subpoeanas -- some to California companies -- as part of an investigation into whether mortgage brokers pressure appraisers to inflate property values.
(Pressure on appraisers? Next you are going to tell me Barry Bonds didn't get those muscles by doing push-ups).
News item: the mortgage bankers are blaming the mortgage brokers for the subprime mess. "Who made this mess? The short-term folks," said John Robbins, chairman of the Mortgage Bankers Assn. "People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
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"Who made this mess? The short-term folks," said John Robbins, chairman of the Mortgage Bankers Assn. "People who get a commission when the deal happens. For them, it's the number of loans that counts. Good loan? Bad loan? Who cares? For them it's all about their commission."
I said in an earlier comment that anyone pointing a finger out is going to have 10 fingers pointing right back at them.. Apparently John didn't read my comment ;).
It is pretty incredible he would blame brokers, the products themselves are toxic (a 2/28 with a teaser rate, with people allowed to be qualified for the payment at the teaser rate, a 3 year prepayment penalty, allowing stated income from wage earners , who is to blame for this loan exactly?) . The MBA is trying to insulate Wall Street and themselves from regulation, but those are the places that regulation would be most effective. If you stringently underwrite loans and check the information given carefully, it wont matter if the broker, borrower, or appraiser are crooks, because you have procedures in place to catch it.
This is simply an attempt to divert regulatory crackdown onto brokers.
Posted by: Cal | May 23, 2007 at 08:18 AM
Is there fraud in Los Angeles real estate? Bwwwaahhhaaa. The story before this about the crap shack in Santa Monica for under a million doesn't answer that question? You should write about real things like why would anyone be inclined to pay that kind of money for anything like that in Santa Monica or Los Angeles as a whole. Or why are people paying 10 to 11 times their income to live in Los Angeles. What's so great about this city that you have to eat oatmeal three times a day to afford your house note. When people start asking those questions then you won't have to ask stupid ones like is there fraud in L.A. real estate. Sheesh
Posted by: Mr IncomeStream | May 23, 2007 at 01:50 PM
"Take a deep breath, feel like your choking"- "Everything Is Broken" (Bob Dylan "Oh, Mercy")
Posted by: Ben Brown | May 24, 2007 at 12:47 PM