FBI Reports Housing Scam Activity Increasing - Doubles in 2007

[flashl]

Federal mortgage fraud convictions have more than doubled in the past year, and the FBI expects a growth in foreclosure scams as the crisis over substandard, high-interest home loans escalates.

Foreclosure rates for these mortgages, known as subprime loans, are at historic highs, according to surveys by the Mortgage Bankers Association and government records.

The FBI opened 1,210 mortgage fraud cases in fiscal year 2007, nearly triple the number of new cases in 2003. Convictions more than doubled from 123 in the 2006 fiscal year to 260 in 2007.

"We expect that number to increase again in 2008," says FBI financial crimes section chief Sharon Ormsby.

USA Today

Now, they tell us.

[Warpy]

1. That's why this isn't going away any time soon

Desperate real estate people are trying to pump the comps and dump unsalable housing off the books any way they can. Extending nothing down loans to people who can't possibly pay through crooked lenders who know the money will all be made on the transactions through closing costs and sale of the loan to a crooked hedge fund for laundering will accomplish both. The people who can't pay get an essentially rent free home for 6 months while the foreclosure process chugs through the courts. If they manage to make one or two payments, it's gravy. Everybody wins, right?

We won't know how bad it is until all those CDOs are traced and counted up and we find out just who bought them, thinking loans backed by hyperinflated property were a sure thing. This stuff has gone all through the economy. Everybody and everything is vulnerable.

[flashl]

2. Many knew two years back that this day was rapidly approaching ...

and they would not stop it.

In Aug, the Federal Home Loan Bank in Atlanta loan Countrywide +$50B of our tax money using as collateral Countrywide mortgages. Over 60% of those mortgages had no income verification.

So much for looking out for the public's interest.

[Warpy]

3. Hard to believe I sold my dad's house 2 years ago

and sold well under the comps because I knew it was coming. Driving around the block and counting the "for sale" signs (most of which are still there, per Zillow) told me it was coming. People thought I was nuts for letting it go for what I sold it for. It's now 20% less per Zillow than I sold it for. Three weeks after I sold, the local papers made it official: the bottom had fallen out of the market and nothing was selling.

A lot of us knew this was coming. Apparently, we just weren't the right people.