https://gotoby.com/wp-content/uploads/2020/10/go-toby-logo.jpg 0 0 Toby Tobin https://gotoby.com/wp-content/uploads/2020/10/go-toby-logo.jpg Toby Tobin2010-01-04 00:00:002021-03-19 14:56:04Most Mortgage Fraud Will Go Unpunished
Most Mortgage Fraud Will Go Unpunished
An article in the St. Petersburg Times points out the problems; investigations are paperwork and labor intensive. Investigative agencies are short staffed. Fraud is hard to prove.
Palm Coast, FL – January 4 – GoToby has been reporting on mortgage fraud for nearly three years as evidence grew that mortgage fraud was a major contributor to the excessive price run up of the real estate boom during the first half of the decade. Now, an article in the St. Petersburg Times hints that most of the fraudsters will go unpunished. Why?
Real estate transactions cross too many jurisdictional boundaries; both geographic and regulatory. No single agency has responsibility to police the entire transaction from sales initiation through lending and closing. Consequently, nobody is in charge. We all know what happens when nobody is in charge.
Fraud is simply too easy to commit and too difficult to prosecute. It takes only a few bogus appraisals to raise the value of an entire neighborhood or new development. The resulting transactions and those that follow, represent potentially millions of dollars in loans.
It’s not illegal to add incentives to a new home sale. Developers and builders often include club membership fees and dues to lure potential buyers. It’s OK to add a furniture package and a leaseback deal if the property is going into a rental pool or being used as a builder model. But full disclosure is required. If the leaseback and furniture package are bundled into the appraised price and not disclosed on the HUD form, it’s wrong. It’s also wrong if the leaseback and furniture package are a sham used only to create cash back at closing. When the recorded deed price includes the value of incentives but does not disclose them, the value is artificially raised, affecting future comps in the area.
Prices rose too steeply and too high. Eventually the bubble burst, leaving lenders and property owners fighting over the scraps. The only winners are those who profited unjustly by gaming the system. A percentage from each group at the transaction table (buyers, sellers, agents, brokers, appraisers, title companies, loan originators, and lenders) can be found among the guilty. Unfortunately, most of them will get away with it.
As mortgage fraud runs rampant, meaningful prosecutions in short supply
By Michael Van Sickler, St. Petersburg Times Staff Writer
In Print: Sunday, January 3, 2010
TAMPA — A leading cause of the foreclosure deluge that has swamped Tampa Bay’s housing market is mortgage fraud, so it was welcome news in November when federal prosecutors announced they had nailed some of the culprits.
A nine-month investigation nabbed more than 100 defendants and 700 properties across a region that includes Tampa, Orlando, Jacksonville and Fort Myers. The U.S. attorney for the Middle District of Florida said he hoped the sweep would send a clear message to the public.
"Mortgage fraud will not be tolerated," said A. Brian Albritton. "We must protect the integrity of the real estate market in our communities."
But of the 22 Tampa Bay area cases that were disclosed, none involves the kind of major fraud that helped crash the U.S. economy. They name 29 people who are accused mostly of minor scams, such as individual borrowers lying on loan applications. The cases do not involve more meaningful offenders, such as lenders, home builders or appraisers who exploited the lax oversight in the boom years on a grand scale.
Toby’s Commentary: I’m not for big government, but when regulations are passed, taxpayers have a reasonable expectation that they will be enforced. The agencies responsible for enforcement need to be funded. Otherwise, consumers are left with a false expectation that their interests are being protected. They become ripe targets for fraud.
Lax enforcement brings out the "marginal crook." They’re the otherwise normal, honest and upright citizens who cannot resist the urge for the quick buck when it seems too easy to get without repercussions.
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The best part of teh full article was:
"Still, chasing fraud after it has been committed is more expensive and less efficient than preventing fraud in the first place with better regulation, said Adam Leitman Bailey, a New York City real estate attorney who writes about the mortgage industry."
I couldn’t agree more. That is like trying to lock up a terrorist after he has blown something up! It just doesn’t work so well when it is after the fact!
Fraud does pay off
Finally, the truth is out. Crime does pay.
The people who committed these huge Frauds will have to pay otherwise it shows people that Crime does pay and will open the flood gates to others. In answer to John, the Terrorist still has to be locked up to show future terrorists there are consequences to their actions, even if it is after the fact.
The payment is all they care about
Most people don’t care about the appraisal, or closing cost, and just want to know how much down, plus closing cost, and how much it will cost per month. Same with vehicle purchases. The trust factor is gone from the picture due to the high they have from just getting something new.When things are not disclosed in dollar amounts and added at the closing, then they get mad. That is when the market is going up and they know value will increase. Today with questionable value increases, all cost become more considered, and questions asked. Exposing over charging when detected usualy drive people to others and weeds out the bad few. The web exposes fraud and criminals very fast, helping to stop them in their tracks. Maybe we need an Amber alert for these crooks.