Thursday, April 14, 2005

Fraud Came With Housing Bubble

The housing bubble has brought many negatives with it. Mortgage fraud is so prevalent that it now threatens the nations' economy. David Callahan with Demos "This is just another area in American life where a boom, with all its money to be made, brought out the worst in us. The carrots for cheating are getting bigger and even though the sticks are hitting harder, our watchdogs are asleep so it's easy to get away with things."

"Too bad the mortgage industry has no single federal agency monitoring its affairs. Government regulation is splintered and in some cases, notably mortgage brokers, almost nonexistent.'You can be driving a truck or selling cars today, and tomorrow be a mortgage broker dealing with large sums of money.'"

"Housing is a more important part of our economy than it's ever been, and people's fortunes are tied to mortgaged properties. We could never nail down the connection between fraud and high real estate prices, but it seems intuitive. All you need is for that bubble to pop. If interest rates go up and maybe the economy takes a wrong turn, we could have economic catastrophe."


At 10:11 AM, Anonymous Anonymous said...

So many people I know that bought house in this 2 years are putting only 0 or 10 % down, and most of them really without any saving.
I heard a couple of times they mentioned the worst case for them is to walk away with bad credit.
(And most of them from India).

However, the people that have a lot of cash/saving still side line,
because the hosue price is too high,and they don't want to take risk.
BTW, I live in Fremont,CA.

At 10:36 AM, Blogger Ben Jones said...

Thanks anon in Fremont. Please keep us up to date.

At 10:44 AM, Anonymous Anonymous said...

(And most of them from India)

1. Just used as examples.

2.After Tech bubble, more and more Engineers willing to back there original county because more job opportinuity.
and RE is a good final bet to make fortune, because you can never lose.

3. Use 5/25 loan, for the first five years, No too much $ difference between rent and buy.

At 11:57 AM, Anonymous Anonymous said...

What's most astonishing, because of the opaqueness, and illiquidity of the real estate market, these frauds are difficult to measure. It's probably far worse than anything else seen even on the NASDAQ. Has someboby seen information on the subject of how to quantify on a monetary basis, these frauds ?

At 12:05 PM, Anonymous Anonymous said...

Is there a way to quantify the approximate amount of these frauds on a monetary basis ? I haven't seen anytihing about this recently. Is it possible to quantify what is going on with these criminal activities.

At 12:07 PM, Blogger Ben Jones said...

(Is it possible to quantify what is going on with these criminal activities)

I think the guy interviewed said it was "unknowable" due to the nature of it. I agree, this will be much larger than Nasdaq 2000.

At 2:26 PM, Blogger Sunny said...

Here is what is scary about the mortgage fraud: What we are hearing about now, in an unbelievably good real estate market, is only the tip of the iceberg. If real estate markets drop or even flatten, and banks and mortgage holders begin to see an inordinate amount of foreclosures, then those banks will suddenly be interested to know how many of these foreclosures were due to fraud. Lenders become ultra-squirrelly, and this will tighten money availability even further. Thus begins the cycle in the opposite direction.

I've witnessed many examples of mortgage fraud or fudging; I've been practicing real estate law for several years. It happens all the time; its almost the norm.

At 5:36 PM, Anonymous Anonymous said...

Sunny, if you are practicing law and seeing this happen, what are you doing about it? If nothing aren't you simply contributing to the very thing that you are complaining about?

Just Curious


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