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.

It has actually been a law for years that if you apply for a real estate loan, you are supposed to get an estimate of what that credit will cost you within 3 days of the day the loan application was taken.  For the most part the mortgage industry did that, except the estimate was just that. Merely an estimate and it was rarely correct.  If you’ve ever bought a home you know exactly what I’m talking about. It’s that piece of paper that puts you into shock when you look and see the $100,000.00 you’re borrowing to buy that $120,000.00 house is actually going to cost you $300,300. to pay back, or something like that. They figure in the APR which is the amount of the fees, etc. you are paying and shows what your loan may adjust to if you have an adjustable rate.

In the past, you’ve gone through the escrow period, you’ve gotten loan approval, you’re at the title company to sign off on the house you’re buying and low and behold, these are not the costs the lender had told you about. This is not the interest rate you applied for.  Welcome to one of the most stealth real estate scams ever run. You are at the perfect point where if you don’t agree to what’s before you in escrow, you don’t get your house. This was the perfect spot to insert a little “emotional blackmail”. This was an industry standard for many years and I personally have never seen one person in escrow refuse to sign.

Finally there is a new law to protect home buyers from this type of thing in the future. Oh sure, where there’s a will, there’s always a way, but for now it will be a little tougher. There is a “uniform” form to be filled out, lender fees cannot change between when you get the statement and when you get to escrow. All fees for closing costs where the lender has provided the service provider have to be within 10% of actual costs (which to me is still too much leeway). They still have to give you the estimate within the allotted 3 day time period from when they take your application, but for the most part there will be no more drastic and last minute changes in escrow.

This is supposed to provide a lot more transparency into actual fees the new buyer is paying, and to avoid any more of one of the oldest real estate scams on the books.

To see the new law, actually made in 2008 to take effect Jan. 1, 2010, just visit the HUD website, and click on RESPA. The FAQ’S may be easier to understand, and you can find them here RESPA.

If you have any comments or questions, don’t hesitate to leave a comment. If you’re looking to buy or sell a home, or if you’re a homeowner in trouble, visit my website at SiliconValleyRealEstateOnline.com and get some free information.

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.

Evidently the banks have rules based on the “2001 Patriot Act” to use due diligence to find out where the money comes from before it gets deposited. Due to the Patriot Act, if you’ve tried to open a bank account lately, they want to know everything down to the size of your underwear almost.  So foreign dignitaries, etc. have found a way to launder money through our American system, because really, when it comes to buying and selling something, what American doesn’t like “green”?

Tens of millions of dollars pass through our system. Foreigners buy million dollar mansions here, jets there, etc. Due to an exemption given to real estate and escrow agents by the Treasury Dept. in 2002, it makes the real estate market very easy to manipulate with “ill-begotten” funds.

What cracks me up is here we are again, where the rights of others come before those of our own. When I have a buyer for a house, I have to be able to show a complete “paper trail” for where those funds have come from. From this investigation, if you’re a foreign dignitary, etc. all you have to do is have the funds. Nobody seems to care where they come from. Of course if you’re doing a multi-million dollar transaction and most of it is cash, guess what? Yes, cash is still “king”.

One article stated “The report said Nagler worked with a colleague in the insurance industry to provide insurance coverage for Obiang’s 32 motorcycles and cars, which included seven Ferraris, five Bentleys, four Rolls-Royces and two Lamborghinis.” Must be rough, aye?

At least we’re not in it alone this time. Money laundering in real estate is happening with the help of not only real estate agents and escrow officers, but lobbyists, insurance agents, and real estate lawyers. The corruption and greed will never cease to amaze me.

On a different note, I’ll be holding an open house in Mountain View,

2/10/2010

California this Wednesday from 11:30 am to 2:30 pm. For information about this lovely home, visit http://www.whismanhomeforsale.weebly.com

If you have any questions regarding real estate in California, please feel free to contact me. I’d be happy to help.