So you dont think there will be many mortage defaults in the next few years? People need a home, right?
This another of those "ten kinds of wrong" articles and it raises several questions for me.
1) I thought it was hard to buy a house when you WANTED one. This article makes me seriously question lenders. How do people buy houses without knowing about? If suspicious reports (surely incidents are much higher than reports) are up 5x since 2000, wouldn't you expect lenders to be MORE careful not less?
Of course the answers here are all tied up in bank profits, the way the current system rewards lenders for making loans but doesn't punish them for bad loans, and the hysteria of the housing market.
2) One thing I didn't expect (but should of) was the influence of organized crime. I suppose if you are going to commit crimes, housing fraud is more palatable than selling drugs.
3) Where is our public school system and why aren't citizens learning basic financial skills such as how to invest? When people start talking about privatizing social security, have then read articles like this one.
This is a sad article and I am sure these people in VA arent the only victims.
Town's Residents Say They Were Targets of Big Mortgage Fraud
September 28, 2006
MARTINSVILLE, Va. -- Federal and state authorities are investigating allegations of an elaborate mortgage fraud involving about 100 people living in or near this small factory town who say they unwittingly took out loans to buy houses at inflated prices in Indiana.
The borrowers, who include truck drivers, factory workers, a pastor and a hair stylist, say they were duped by acquaintances into signing stacks of documents and didn't know they were applying for loans. Instead, they thought they were joining a risk-free "investment group."
Now, many of the loans are in default, the borrowers' credit ratings are in ruins, and lenders are pursuing the organizers of the purported investment group in court. Companies stuck with the defaulting loans include Countrywide Financial Corp., the nation's largest home lender, and Argent Mortgage Co., another big lender.
A lawsuit filed by Countrywide accuses the organizers of acquiring homes and then fraudulently selling them for a quick profit to the Virginia borrowers. Representatives of the borrowers put the total value of loans involved at about $80 million, which would make it one of the largest mortgage-fraud cases ever.
Mortgage fraud, involving loans obtained by providing false information, has mushroomed in recent years as lenders have pushed for speedier loan approvals in an effort to remain competitive and milk maximum profits from the now-fading housing boom. The Federal Bureau of Investigation reported that mortgage fraud led to losses of $1 billion in 2005, up from $429 million a year earlier. Some of the fraud that slipped through during the boom is only now starting to surface.
Attracted by the ability to obtain large sums quickly, some criminal gangs involved in drug dealing and other street crimes have branched out into mortgage fraud, says Chip Burrus, assistant director of the FBI's criminal investigative division. "It's more profitable and less risky," he says.
Part of the problem, say critics inside and outside the industry, is that -- in their haste to earn commissions and fees -- loan officers and brokers are asking fewer probing questions. "We aren't asking questions, and we aren't verifying like we used to," says Bob Simpson, president of Investors Mortgage Asset Recovery Co., Irvine, Calif., which helps lenders recover losses from fraud. "For legitimate, honest consumers, that's a good thing," but it creates opportunities for crooks, Mr. Simpson says.
...
Mr. Jacobs and others who joined the group say they were rushed into signing documents without being given time to read them. Within weeks of signing those papers, Mr. Jacobs says, he received two payments, totaling $7,000, from the Penns. After a few more months, however, he began to get calls from Countrywide representatives demanding mortgage payments. Mr. Jacobs says it turned out that two loans, totaling more than $200,000, had been taken out in his name and that he owned two houses. He says he now thinks the houses might be worth only around $40,000 apiece.
Others who signed up for the group say their credit ratings have been so devastated that they can no longer buy anything on credit. "My dad brought me up to pay my bills before I eat," says Nancy Muse, who heard about the group from a friend who used Ms. Penn as a hairdresser. Months later, Ms. Muse found out she was in trouble when she inquired about buying a modular home for herself. A representative of the home-building company checked her credit and told her she already owned four homes.
In its lawsuit, Countrywide said it acquired some of the loans from the original lender, People's Trust Mortgage LLC, Erlanger, Ky. Countrywide alleges that a loan officer for People's Trust "conspired" with Mr. Penn and associates to apply for loans using false information about the borrowers' incomes and financial assets. Representatives of People's Trust couldn't be reached for comment. A lender who formerly had dealings with People's says he believes it is no longer in business.
The Countrywide suit says companies associated with the Penns acquired houses and then quickly resold them for much higher prices to the Martinsville borrowers. That allowed the Penns and associates to profit from the quick sale while leaving the people in Martinsville stuck with loans they couldn't pay, the suit says. One church secretary, who says she heard about the investment group from her pastor, says she and her husband, a building-maintenance worker, learned that they were the owners of 14 homes in Indiana, a state they had never visited.
