A yearlong Herald-Tribune investigation into thousands of suspicious Florida flip deals found that lenders of all kinds approved risky deals and ignored obvious red flags for mortgage fraud.It makes you wonder what happened to the huge commissions that the loan officers took home as they signed away good money for bad loans.
When a Sarasota home builder was unable to sell his newly built houses, mortgage companies lent him and his family nearly $2 million so they could purchase four themselves. Three of those properties are now bank-owned.
Washington Mutual loaned a Sarasota resident $2 million three months after it had foreclosed on a previous $2 million loan. The new loan went into default less than a year later, about the same time WaMu's crush of bad loans put it out of business.
Banks and mortgage companies dug an even deeper hole for themselves by continuing to lend money for suspicious deals long after the real estate boom ended. In 2007, more than a year after the market started falling in mid-2005, flippers arranged more than $1 billion in sales involving suspicious price increases.
What makes the flipping fraud so egregious is not just that it happened, but that it would have been so easy to stop.
Friday, July 31, 2009
Mortgage fraud and bailing out the banks
As the government has been bailing out banks that are the "victims" of a crazy boom in housing, an investigative report shows that banks in Florida were looking the other way when property flippers were getting fraudulent loans from them. Here are a few quotes: