Are we in a full circle of real estate fraud?

Could today’s seductive conditions in the housing market – severely marked-down prices, record low interest rates and hundreds of thousands of foreclosures waiting to be resold – be breeding new generations of the very practices that led to the crash? More

To continue reading this article, please do one of the following.



ADVICE

Are we in a full circle of real estate fraud?

Posted 12/26/11

Could today’s seductive conditions in the housing market – severely marked-down prices, record low interest rates and hundreds of thousands of foreclosures waiting to be resold – be breeding new generations of the very practices that led to the crash?

In an ironic twist, there are signs that the wreckage left over from the housing bust may be reigniting dubious real estate schemes and fraud. According to researchers:

• Property flippers are back in action in places like south Florida and Las Vegas, where condo prices crashed but are now seeing appreciation again in some areas.

• So-called “floppers” are defrauding banks by hijacking short sales at prices below what legitimate purchasers are willing to pay. In these schemes, realty agents obtain fraudulent appraisals to convince banks to sell houses at below-market prices to investor groups. The investors then flip the houses at fair market prices to ordinary homebuyers and split the quick profits.

• Creative “credit enhancement” companies are “renting” investors the bank-account balances they need to demonstrate to lenders that they have the financial wherewithal to qualify for a mortgage. The accounts are for real, but they don’t belong to the loan applicants who claim them. Account names are assigned to applicants – who pay for the service – but they are never allowed access to the money. When mortgage underwriters check to verify the deposits – which are in reality fraudulent sub-accounts – they are told the money is in the name of the loan applicant. One investigator pretending to be a purchaser was verified as having funding available in the amount of $850,000. The loan application was to buy 935 Pennsylvania Ave. NW, in Washington D.C., which is the headquarters building of the FBI.

• Investors are hoodwinking lenders into giving them low down payments and rock-bottom interest rates by lying about their intentions to occupy the property they plan to buy as a principal residence. Some investors consider such dissembling nothing more than a fib, but in reality it’s bank fraud. Researchers at the Federal Reserve Bank of New York have documented that widespread falsehoods by investors about occupancy played a major but previously unrecognized role in the real estate bust.

To Ann Fulmer, a former white-collar crime prosecutor who is now a vice president with mortgage-fraud analytics company Interthinx, this all amounts to a “past is prologue” situation – the market conditions are ripe for a reprise of some of the worst behavior of the boom and bust. Her firm’s latest study of mortgage fraud nationwide, covering loan origination and other data from the third quarter, found that applicants’ dishonesty about their employment and income was up 9 percent from the same period the year before and a stunning 50 percent from the third quarter of 2009. The reason: Borrowers increasingly are falsifying W-2s and other records in order to meet the tougher debt-to-income thresholds lenders adopted following the bust and recession.

Next Page
Calendar
PBN Hosted
Events

Join PBN for the best networking event and party of the winter - January 15, 2015 - the Book of Lists Party at the Providence Public Library. Reserve your spot early!
  • Best Places to Work
    Enrollment is now open for the 7th annual Best Places to Work program. Winners w ...
  • Manufacturing Awards
    Applications are now being accepted for the 2nd Annual Manufacturing Awards. Dea ...
Advertisement
Purchase Data
Book of Lists
Lists
Book of Lists cover
PBN's annual Book of Lists has been an essential resource for the local business community for almost 30 years. The Book of Lists features a wealth of company rankings from a variety of fields and industries, including banking, health care, real estate, law, hospitality, education, not-for-profits, technology and many more.
Data icons
Data can be purchased as single lists, in either Excel or PDF format; the entire database of the published book, in Excel format; or a printed copy of the Book of Lists.
  • Purchase an e-File of a single list
  •  
  • Purchase an e-File of the entire Book of Lists database
  •  
  • Purchase a printed copy of the Book of Lists
  •  
    National
    Local
    Latest News
    Advertisement