Taken to the cleaners: A bank gets burned
Good morning. One of the few major real estate fraud prosecutions in the region is the federal prosecution of an alleged fraud ring in Beverly Hills that operated from 2000 to 2003.
Today the L.A. Times takes a second look at the case, and it doesn't reflect well on Lehman Brothers, which is the alleged victim of a series of fraudulent transactions, appraisals and loans.
Not that Lehman Brothers did anything wrong. But the bank seemed awfully eager to lend, and awfully clueless: "Kathy Moore's loan application sailed through the mortgage desk at Lehman Bros. Bank, and little wonder. With sterling credit, deep pockets and two appraisals pegging the value of the Benedict Canyon house she wanted to buy at $2.5 million, she seemed a perfect fit for a $1.47-million loan. Had the bankers taken a closer look, they might have discovered that the home was worth just $775,000 and that Moore's borrowing power existed only on paper."
Another house in Brentwood sold for $759,000 in November 2000, and just two months later sold again for $2.2 million. Lehman was the lender on the second sale.
In all, Lehman says it made loans totalling $142 million to the same cast of characters in Beverly Hills. The bank isn't commenting as the various cases wind their way through the courts. "I think the bankers deserve what they got. They were incompetent," said real estate investor Max Baril. "You have to do more than just keep opening the mail and depositing the checks."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com.
Can anybody say,"Poster Child"?
Although an extreme example; one has to question the competence / common sense of everybody in the chain at Lehman Brothers. I don't think they'd have a $12 per hour clerk approving seven digit loans, (they're not in health care) and you'd have to be smoking some high quality crack to believe any property could show such an increase in value in so little time. What happened to due diligence at every level?
I caught a report of TV last night that profiled a survey in which nearly 40% of the teenagers polled believed it is necessary to cheat in order to get ahead. The commentator admitted to having several friends in jail for white collar crime, but insisted as long as any action met the letter of the law it was all good. To him,even if it was specifically illegal was still good if you got away with it.
I wonder what the YSP on a $1.5 million neg. ARM is? Now divide that number by three to ten years sharing a 6' x 10' cell while being allowed only two showers a week and brad to me about your return.
Posted by: Michael Snyder | December 31, 2007 at 08:03 AM
That is why "value" has lost its meaning .The system is broken. Just wait until people realized the same thing is happening to their overblown portfolios.
2008 will be a blood bath.
Posted by: CD | December 31, 2007 at 09:04 AM
It turns out if you are willing to give away large amounts of money with little due diligence there are plenty of people willing to take it.
Who would of thought it.
Posted by: Cal | December 31, 2007 at 11:37 AM
it's awful that people would do such things, but you benefit because you are certainly going to get great prices now on homes in metro L.A.!! enjoy the weather and don't wait to jump into your new house!
Posted by: lefty | December 31, 2007 at 11:52 AM
It is a shame that our society is of the elite and if they"re not careful our freedom will be all taken away. It saddens me that people from other countrys can come over to the land of the freedom and manipulate our system but our governement allows it and now they want to cry wolf...put a add in the paper.
Unknown
Posted by: unknown | December 31, 2007 at 07:59 PM
The Realtor involved in this case is probably THE most successful Realtor in L.A. county. I mean, he probably makes a couple mil a year doing legit business. I'm a Realtor, too (although for middle-class SFV houses) and I have to ask: how greedy can you get?
Posted by: sfvrealestate | January 03, 2008 at 01:25 PM