House Flipping

Speaking of house flipping, did you hear the one about the 10 people indicted on Friday for bilking mortgage lenders out of over $20 million? These 10 people devised a scheme where they not only put in loan applications for people that didn’t exist, but they kept flipping the same house(s) to inflate the price thus being able to borrow more money.  The Feds are looking at them for bank, mail and wire fraud, plus money laundering. I guess it was good while it lasted. LOL.

Maybe you heard the one about the unregistered sex offender (ex-firefighter) and his partner that were contacting owners of homes before they went to foreclosure sale. They would get the homeowner to relinquish the property and then “flip” it to a new buyer. The buyer would put down a down payment or a mortgage payment, and these two gentlemen would use it for what ever they chose instead of getting the house out of foreclosure. Their scheme involved about 10 houses and they were headed to California presumably to do the same.

Maybe you heard about the sale “rigging” going on on the courthouse steps? A group of investors get together and pay people not to bid on particular properties so as to not inflate the price. What this would mean to you if you were a homeowner whose home has gone to sale, is if your home might have sold for more than you owed the bank, you may have received “proceeds” from the sale. If investors are paying to keep the bids down, there isn’t much of a chance of that happening.

Even builders are getting in on the act. A builder in Ohio built high-end luxury homes. He would then sell it to a “straw buyer” and submit false loan applications and contracts stating he received down payments he never received. The builder then got to walk away from approx.  $3.5 million in mortgage debt, and gained about $500,000 in seller proceeds. They have so many counts against this guy, he’ll be lucky if he ever sees the light of day again.

The hits just keep on coming! Speaking of “house flipping” did you hear the one about…?

Hey, I’ve just recently met Benjamin from Zion Engineering. If you have any demolition needs or remodeling, live in the San Francisco area, this guy and his team are a wonder. Visit their website and then give them a call. Tell him “Lauri” sent you.

HAMP, or the Home Affordable Modification Program was designed as an effort to help distressed homeowners modify their current mortgages. I can’t tell you how much I wish these programs had been in place 18 months ago. Now that they are here, more homeowners really ought to try and take advantage of them.

The homeowner criteria for qualifying is:

1) borrower is delinquent on their mortgage or faces imminent risk of default
2) property is occupied as borrower’s primary residence
3) mortgage was originated on or before Jan. 1, 2009 and unpaid principal balance must be no greater than $729,750 for one-unit properties.

After determining a borrower’s eligibility, a servicer will take a series of steps to adjust the monthly mortgage payment to 31% of a borrower’s total pretax monthly income:

• First, reduce the interest rate to as low as 2%,
• Next, if necessary, extend the loan term to 40 years,
• Finally, if necessary, forbear (defer) a portion of the principal until the loan is paid off and waive interest on the deferred amount.

Note: Servicers may elect to forgive principal under HAMP on a stand-alone basis or before any modification step in order to achieve the target monthly mortgage payment.

While the program provides incentives for the lender, I can see where it doesn’t seem like enough to make it worthwhile on the lender’s end to co-operate. Also note that these guidelines are guidelines the industry can use but doesn’t necessarily have to.

Many of the participants in this part of the Make Home Affordable Program are now suing many of the big lenders such as B of A, Wells Fargo and JP Morgan Chase. It appears that these lenders have given trial modifications to borrowers and then, even though the borrowers have met their end of the obligations, the lender never makes it a permanent modification. This ends up leaving the distressed homeowner more distressed than ever.  Many times the lenders don’t even tell the homeowner why they are canceling the modification agreement. These lawsuits are picking up momentum across the country.

Until recently with tighter laws, at least in California, this part of the program has been a feeding ground for crooks in real estate. Many claim to be able to get the distressed homeowner a loan modification to avoid foreclosure, charge up front fees, and then disappear. New laws have made it so that no one may charge an upfront fee for any of these services.  The borrower could do the negotiating with the lender themselves. Any previously approved companies that were allowed to charge fees, the approval has been revoked. If you are in the state of California and someone is trying to charge you an upfront fee for these services, you should report it to the Dept. of Real Estate right away.

There are plenty of Realtors out there that would be happy to help for free, including myself. Feel free to contact me anytime.

One of the things that I thought was a little ironic, is that someone called my phone from my blog here and needed to talk about being in foreclosure. He had a group of Realtors he said, that said they would help him for $1900. downpayment and $700 a month for each month he received help. They told him even though he would pay the $1900 up front, that they would hold his check in escrow until they performed the services they said they would provide.

Listen up, People! In the state of California it is illegal for anyone that is licensed by the Calif. Dept of Real Estate, or anyone working under someone who is licensed by the Calif. Dept. of Real Estate to take any money from you up front what so ever to help with loan modifications, etc. The Dept. even revoked the permissions of the companies who had at one time received approval from them. It is uniform now.  I can’t say for attorneys, as I am not one, but for anyone else, real estate agents, mortgage brokers, anyone else licensed in California, it is not legal any longer.

I thought it ironic also that at a time when people need our help more than ever to work with their lenders, to get approved for short-sales, etc., the DRE revoked a record number of licenses belonging to real estate sales people last year. There were 800, which really isn’t that many considering how many real estate professionals there are, but I’m hoping they are adding to the number all the time. It means they have caught more unscrupulous people who give all of us that are truly trying to help, a bad name.

If you get approached by anyone trying to charge you an up front fee for their services instead of writing a contract to get paid after the services have been performed, you should report them to the Calif. Department of Real Estate right away. You may have been lucky enough to escape a scam, but there are a lot of people in trouble that wouldn’t be so lucky. It’s everyone’s job to help stop these people.

If you have any questions regarding California Real estate or foreclosure, please feel free to contact me either through email or call. If you have anything to share about this kind of thing happening to you, please do so in the comments section so everyone can benefit from your experience.

This will be a great opportunity for anyone going into foreclosure, in foreclosure, etc. to get some help. This event is absolutely FREE. There will be a talk by the DA on foreclosure scams, another by an attorney on bankruptcy, and more. I’m really looking forward to it. Just going to the orientation Monday I learned about services available that I knew nothing about.  This event is open to anyone in the Silicon Valley- San Francisco Bay Area and any of the surrounding areas. If you can get there, you are welcome.

There will be representatives from all the major HUD (Housing and Urban Development) certified counseling agencies as well as Legal Aid organizations to provide free and truthful information about the process of foreclosure and what options a homeowner has. There will also be a significant number of counseling agencies and a couple of lenders to meet with their clients.

If you can’t make it, one thing I learned the other day is that this center is open Mon-Friday from 9 AM to 5 PM. The Foreclosure Help Center is sponsored by the City of San Jose, and they in conjunction with the Santa Clara County Association of Realtors are putting on the Foreclosure Rescue Event today.

For more information about what documents to bring with you or to make an appointment at the center (no appointments needed for today) just visit their site at Foreclosure Help Center.

Also feel free to contact me direct or leave a comment below if you have any other questions about real estate in California or the Bay Area. If you’re not in our area, you can check with your county or city to see if they have something similar near you.

If you’re needing to sell your home quickly, don’t forget to click the book in the sidebar on selling your home in just 21 days.

Legitimate Resources
If you are at risk of foreclosure or have already received a foreclosure notice, you should contact your lender immediately.
Homeowners also may seek the advice of a reputable housing, financial or credit counselor, attorney, or other qualified professional.
Homeowners may visit the U.S. Department of Housing and Urban Development (HUD) Web site to view
its Guide to Avoiding Foreclosure and its list of California HUD-approved housing counseling agencies. In addition, the non-profit Homeownership Preservation Foundation has a 24/7 toll-free Homeowner’s HOPE Hotline at (999) 995-HOPE.

Report Fraud
If you have been a victim of a foreclosure-related scam or approached by a scam artist, you may report the incident to the following organizations and government enforcement agencies:

• California Attorney General

• California Department of Real Estate

• Department of Housing and Urban Development (HUD)

• Federal Trade Commission (FTC)

• Your local Better Business Bureau

With the recent rise in foreclosures, foreclosure-related scams have exploded onto the real estate scene. These so-called “foreclosure rescue companies” claim they will help save your home, but in reality are out to make a profit — at your expense.

If you are at risk of or in foreclosure, you should be on the lookout for foreclosure scams. Here are some of the red flags to watch out for:

• Asks for money upfront before providing any service

• Instructs you not to contact your lender, lawyer, housing
counselor, family, friends, or others

• Asks for mortgage payments to be made directly to his or her
company or a bank account set up by that person, rather than
your lender.

• Requires payment only in the form of cash, cashier’s check,
or wire transfer

• Promises to stop the foreclosure process, no matter the
circumstances

• Advises you to transfer your property deed or title to his or
her company

• Offers to fill out paperwork for you

• Asks for something to be done immediately and without delay.
This includes pressuring you into signing paperwork that you
have not had the chance to read thoroughly or do not fully
understand

• Encourages you to lease your house and buy it back
over time

• Offers to buy your house for a fixed price that is not set by the
housing market at the time of sale

• Asks for you to give a power of attorney

• Asks for signatures on a grant deed or deed of trust

• Asks for signatures on a document that has lines left blank

• Fails to provide copies of signed documents

• Refuses or fails to put an oral promise in writing

Copyright© 2009 CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.). Permission is granted to C.A.R. members only to reproduce this material for non-commercial purposes. Other
reproduction or use is strictly prohibited without the express written permission of the C.A.R. Legal Department. All rights reserved.
The information contained herein is believed to be accurate as of April 9, 2009. It is intended to provide general answers to general questions and is not intended as a substitute for individual
legal advice. Advice in specific situations may differ depending upon a wide variety of factors. Therefore, readers with specific legal questions should seek the advice of an attorney.

If you have any questions or I can help in any way please either contact me direct or leave a comment below. Leaving a comment will hopefully help many.