Last Friday the Orange County Register published an article that uncovered the details of a recent real estate transaction which was blatant mortgage fraud and will likely be left on taxpayer’s plates. Reading this article just made me shake my head because it is apparent that banks have learned nothing from the mortgage mess we are in today. If you haven’t read the article I suggest you do so, but I will attempt to summarize it below.
An investor purchased the home on Camile St. in Santa Ana at a foreclosure auction for $304,500, about half of what the home had sold for in 2006. This investor then fixed the home up and flipped it to a Hispanic family for $625,000. On a street where homes are selling in the mid $300,000s, this sales price should be an immediate red flag. However, Wells Fargo which issued a $500,000 loan on the property, didn’t bother looking deeper into the deal. The investor sold the home as a for sale by owner and had a plan in place where he could offer a potential home buyer 100 percent financing, even though that is all but unheard of right now. As part of the sale, the seller paid the $125,000 down payment for the buyer, but that’s not all. The seller also agreed to pay the buyer $30,000 in cash, pay the first 3 months of the mortgage and buy them a 52-inch LCD TV. So the real sales price was around $460,000 once the seller concessions are taken into account.
The author of this article went so far as to call up the mortgage broker, escrow officer, appraiser and even Wells Fargo to get their reaction to the deal; it's no surprise, though, that they all brushed it off, saying the details weren’t their business and that it was between the buyer and seller. Wells Fargo declined to commit on this loan in particular because of privacy issues, but beyond that, the best they could come up with was that they have tightened their lending standards. I don’t know about you, but if this is their idea of tightened lending standards, then they have some problems. I sure hope that Wells Fargo uses this information to take some action against this sort of practice, but I’m not holding my breath.
It gets better though, the Hispanic couple who bought the home claim they were lied to. They said that they were told they were buying the home for $500,000 and that they were going to get 100 percent financing. They didn’t know about the $625,000 sales price till the end when they signed the papers. Translation: Either this couple didn’t bother to read the purchase and sale agreement when they signed it, or else they are lying in order to protect themselves now that this information is on the public radar. My take is it is probably option #2. This couple already owns another home on the same street, so this is not their first time buying a property. In addition, they admitted to noticing the price at closing, but agreed to sign anyway. I think an honest person would have questioned that then and there.
If you ask me, these buyers were in on the deal, along with the seller, mortgage broker, appraiser and escrow officer. They were wooed by the prospects of $30,000 in cash. All they had to do was sacrifice their credit. The investor would pay the mortgage for 3 months, taking away the chance of the bank red flagging the deal for further investigation if the loan goes non-performing right away. After that, the buyers don’t even need to bother paying the mortgage, they can just let it fall back into foreclosure and get lost in the crowd. After all, Camile St. is already a foreclosure haven; what's one more?
So the next question is, who is going to be stuck with the final bill when all is said and done? The buyer? The lender? That would be a no and a no. The buyer has nothing at stake in this deal; in fact, they were paid to buy the home. If you thought the lender, you are also mistaken, because guess what? This was likely a conforming loan. That means it is going to be guaranteed by Fannie Mae or Freddie Mac. Thanks to the new housing bill that President Bush signed into law yesterday, taxpayers are likely going to be the ones to take the hit on this one, as well as for other mortgage frauds out there. It is disheartening to see that obvious cases of mortgage fraud are still occurring. But now that we as taxpayers are ultimately responsible for the bill, this just makes me mad.
It's really very sad to know that Mortgage Fraud is still going strong.
It will make the taxpayers in loss and they will have to pay extra bill.
The investor would pay the mortgage for 3 months, taking away the chance of the bank red flagging the deal for further investigation if the loan goes non-performing right away. After that, the buyers don’t even need to bother paying the mortgage, they can just let it fall back into foreclosure and get lost in the crowd.
A significant aspect of the mortgage crisis which Congress needs to investigate and the public needs to be WARNED about is falsified IRS tax form 1099-A’s or 1099-C’s which could cause even worse problems associated with foreclosures. To illustrate, here is a portion of my statement that was faxed to the Louisiana Secretary of State, Financial Institution Department concerning Wells Fargo’s false 1099-A, as well as a link to entire actual statement; posted at: http://www.lawgrace.org/2008/08/08/my-august-8-2008-statement-to-the-louisiana-secretary-of-state-office-of-financial-institutions-concerning-wells-fargo-irs-and-mortgage-frauds-sham-foreclosures-and-judicial-collusion-and-national-app/
This Financial Office mistakenly thought a complaint was filed concerning my property; and on July 30, 2008, Ms. Kathy Drzewiecki sent a responsive letter on Wells Fargo's behalf. . . .As your records show, GE Capital Mortgage Services, Inc., became defunct in year 2002 when it merged into GE Mortgage Services, LLC, its "successor." Therefore, it is impossible for foreclosure auction to have LAWFULLY been carried out in year 2005 on behalf of the non-existent GE Capital Mortgage Services, Inc. Also, contrary to what Ms. Drzwiecki wrote, it is NOT POSSIBLE in year 2005 for Wells Fargo to continue being the "mortgage servicer" for non-existent GE Capital Mortgage Services. Furthermore, if my property was (impossibly) ACQUIRED by GE Capital on May 19, 2005, there is NO LAWFUL REASON for the IRS form 1099-A to exhibit Wells Fargo's name!
Another thing Ms. Drzewiecki's letter failed to state is that I initially acquired my residence property in 1993 through AmSouth Bank. For home improvement in 1999, I refinanced it with GE Capital. I had equity in the property, and I never had a subprime loan. (Marriage failure caused me financial ruin; and crooked deals in Family Court sealed my fate.)
On the other hand, facts overwhelmingly demonstrate that, using defunct GE Capital's identity, debt collector attorney Herschel C. Adcock, Jr., fraudulently seized and acquired more than $80,000 when he flipped my property. Also, contrary to the form 1099-A, the Fair Market Value was not $12,000 -as manifest from the year 2005 sale price for which that property was sold in that same tax year purportedly to a third party.
Because innumerable people whose property was (wrongfully) taken by people like Mr. Adcock are yet exiled due to Hurricane Katrina, it appears that the foreclosure epidemic in the nation is not a problem is Louisiana. However, what is an even worse problem is that a lot of displaced foreclosed former property owners will one day discover there is a 1099-A or a 1099-C for which the IRS wants answers! If that 1099 is replete with false information, there could be severe tax
effects and a lot of needless untangling to be burdened with.
Across the country, foreclosures have been halted because "real party interest" was absent from those foreclosure proceedings. Yet, in Louisiana, it would not be farfetched for foreclosures to become filed in the name of 'Mary had a little lamb', and judges allow peoples' homes to become seized.
from Barbara Ann Jackson (www.lawgrace.org)
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