Real estate 'getting worse'; a surge in fraud probes

A couple of quickies: The view of real estate from Wall Street is considerably less cheerful than it was last summer, when "containment" was everyone's favorite word. From Bloomberg via Patrick.net: "JPMorgan Chase Chief Executive Officer Jamie Dimon said he expects U.S. home prices to drop as much as 9 percent this year as even borrowers with the best credit have difficulty keeping up their mortgage payments."

More: " 'Real estate is getting worse,' Dimon said in a conference call today with investors after the bank, the third largest in the U.S., reported first-quarter earnings. 'Home prices we still expect to go down.' "

Also, from the Associated Press: "FBI Director Robert Mueller says there has been a 'tremendous surge' in mortgage fraud investigations, and he expects it to keep growing.  At a Senate hearing Wednesday, Mueller estimated that the FBI has 1,300 investigations underway, 19 of them involving sub-prime lending practices by U.S. financial institutions."

My two cents: I worked for a particularly results-oriented boss who was known for saying, "Don't tell me about the labor, show me the baby." In this case I agree: Don't tell me about the investigations, show me the indictments. To date, nationally and in California, we've seen only nickel-and-dime cases against small real estate firms. When the Justice Department truly has its eyes on a prize, it moves very quickly and, yes, ruthlessly. It sits important people down in rooms and tells them they have two choices: plead guilty and hope for a short prison sentence or be indicted and risk a long one. Time will tell if that kind of prosecutorial fury is in evidence here. There's no sign of it at the moment.

Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
Photo Credit: Associated Press

Comments

[Enlightenment]

Southern California has once again earned the dubious distinction of being the financial fraud capital of the nation!

"I would say 60 to 70 percent, or maybe even higher, of our cases are real estate fraud," said a FBI agent. He said 90 percent of those cases involve people who lie on their loan documents.

Even if a bank doesn't fund a requested loan, Title 18 of the U.S. Code, where all federal laws are set forth, prohibits making false statements on a loan application.

If they cannot afford a home, they surely cannot afford the penalty. The maximum penalty for real estate fraud is 30 years or $1 million per count, said the FBI agent.

As for the length of time involved in such cases, he said, the average "one-shot" loan case takes up to a year to investigate and get an indictment and another 60 days to two years to get to trial.

The above text came from this article http://findarticles.com/p/articles/mi_m5072/is_/ai_14243814

Report liars to the FBI !!!
Report liars to the FBI !!!
Report liars to the FBI !!!
Report liars to the FBI !!!
Report liars to the FBI !!!
Report liars to the FBI !!!

[Cal]

Ace,

Thanks for looking at the MLS, the only stat I remember specific to the SFV was in a daily news article:

"In the San Fernando Valley alone, there were almost as many foreclosures in the first two months of this year as sales. During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge. "

http://www.dailynews.com/ci_8906031

But they are comparing trustee sales to home sales. Not the % of home sales that were foreclosure or short.

[LeavinLA]

They'll go after the big dogs: the lenders and the big brokers.

Going after individual buyers is too labor-intensive. Who can prove whether the buyer fudged the income line or the broker? By investigating a broker, they can prove a pattern of fraud.

Watch for the big lenders to go first, then the big brokers. Some already have been busted, like the guy who ran Americorp. And that BH Realtor -- Babajian.

[tew]

Dog and pony show whippings of corporate criminals is only going to feed victimization claims. Yes, there are lots of criminals across the entire chain. Yes, the white guys in suits should go to jail. However, law enforcement has neither the resources nor the backing of the government to pursue the vast majority of criminals - the independent mortgage broker, the extended family that passed houses around, the independent appraiser, the real estate agent, and the other conspirators. This is troubling because it frames things in a "little guys vs. the big corporation" perspective. Sometimes that view is correct. In this case, it's counterproductive. We have met the enemy and it is us.

[Uncle Billy Climbs Mont Pelerin]

Yes, what did ever become of Baba Bajian and Company?

[dunno]

Even if there are indictments of the big players, look at what's gonna happen.

"In Justice Shift, Corporate Deals Replace Trials"
http://www.nytimes.com/2008/04/09/washington/
09justice.html?_r=1&hp&oref=slogin

Absolutely disgusting.

[Phyllis Harb]

Forget about the home buyers that overstated their income on the "stated income loans".

The Feds need to go after the short pay scams, and the escrows that closed for (even more) over inflated prices due to the "cash back to buyer schemes".

[Trapped]

I am currently in the process of suing the real estate broker who sold me my home two years ago. In front of several witnesses she assured me that my home would appreciate fifteen to twenty percent a year, and that it was a great investment for the future. I cannot even SHORT SELL it now for half of what I paid. My attorney is filing charges ranging from misrepresentation, to fraud, to violation of a verbal contract. I know this is a long shot but I will not be deterred. Never, and I mean NEVER trust anything a real estate agent says to you, and NEVER believe anything the liars at the NAR claim.

[JohnnyB]

tew; "This is troubling because it frames things in a "little guys vs. the big corporation" perspective. Sometimes that view is correct. In this case, it's counterproductive. We have met the enemy and it is us."

While I understand what your saying... I can't think of many better things the FBI, Justice Dept. and State's attorneys should be doing than aggressively prosecuting the big mega wealthy corporate leaders that broke the law in this massive scheme. Productivity should be measured with efficiency, results and returns... and the industry insiders have billions in ill gotten gains in their accounts. This is where the money is. We're not going to squeeze much money from an immigrant day laborer who lied on his loan to live in a 500k house or a small time flipper who lied on his ten mortgage applications when he said he would be the owner occupier in each one. Going after the little guys is a complete waste of time and counterproductive (and as you say law enforcement doesn’t have the resources).

Like performing an arson investigation to determine the initial cause, this scheme started out with a relatively small group of mega wealthy insiders meeting, strategizing and ultimately creating the mechanisms to drive a massive housing bubble through bogus, fraudulent investment products. They spent millions to keep government insiders quite and complicit.

Once the mechanisms were in place (hidden in complexity, kept off the books and shielded by fraudulent ratings) the process of overleveraging the country’s RE assets took off and all the industry players down the chain quickly realized a new game was in play.

Resigning our justice system to not even bother going after the big criminals (by just saying "the enemy is us") is counterproductive. Is that what the (microcosm example) Enron employees and stock holders were supposed to say?

[Cal]

I'm sure Peter is already all over this.. but we definitely need to hear more of Trappeds story.

Agency relationships are funny things, realtors dont take them nearly as serious as they should. It is amazing how much of what they say leaves them liable.

I'm not a big believer in lawsuits but there needs to be many more Trappeds suing their agents. The industry as a whole gets away with far too much misrepresentation.

[LeavinLA]

Trapped: Your and your attorney are both candidates for straitjackets. You made the decision to buy. Deal with it.

(and you'll have to find me before you can try to sue me for defamation. thank heavens truth is the ultimate defense.)

[anonymous]

I was looking for a place to post this on LA Land, and lo and behold, there's trapped's post.

Holy Cow! I can't believe I missed this! It ran last weekend when I was out of town. Now the attorneys are going for a slice of a pie that doesn't exist!

http://www.lvrj.com/business/17590869.html

Uh, Peter, you hear any more on this?