Citing “seductive conditions in the housing market” such as marked-down prices, record low interest rates and the number of foreclosures waiting to be resold, real estate columnist Kenneth R. Harney called attention to signs that “the wreckage left over from the housing bust may be reigniting dubious real estate schemes and fraud.” In a syndicated column published on December 16, 2011, Harney cited research indicating some of the practices that led to the crash are still occurring, such as:
- The return of “property flippers” — While a report from the Federal Reserve Bank of New York said that the investors who buy, quickly fix up and resell properties were a big reason for the housing crisis, Harney said flippers are back in areas such as south Florida and Las Vegas, where “condo prices crashed but are now seeing appreciation again.”
- Realtors profiting by ripping off clients — As opposed to the flippers, “floppers” drive down the price of your home so the lender will let the borrower sell your home for less than it is worth. As Harney noted, realty agents use bogus appraisals to convince banks to sell houses at below-market prices to investor groups before selling the houses at fair market prices to ordinary homebuyers and splitting the profits.
- “Credit enhancement” companies that rent investors the bank account balances they need to qualify for a mortgage — Harney said account names are assigned to applicants who pay for the service, but they are never allowed access to the money. Mortgage underwriters are told the money is in the name of the loan applicant when they check to verify the deposits, which in reality, are in fraudulent sub-accounts.
- Bank fraud from investors — According to Harney, researchers at the Federal Reserve Bank of New York “documented that widespread falsehoods by investors about occupancy played a major but previously unrecognized role in the real estate bust.” Investors dupe lenders into giving them low down payments and rock-bottom interest rates by lying about their intentions to occupy the property they plan to buy as a principal residence.
If you are among the many homeowners across the country in need of foreclosure help, you do not have to falsify your W-2 or risk engaging in similar dishonesty to save your home. A Chapter 13 or Chapter 7 bankruptcy process could allow you and your family to legally stay in your house.
Does the reprisal of some of the dishonest practices before the housing bust lead you to believe that another crash is imminent? What more do you think should be done to eliminate these behaviors?
Law Firm of Kevin D. Judd – Washington DC bankruptcy lawyer
