Widespread Mortgage Fraud, Not Homeowners, Toppled the U.S. Housing Market | Hacker News Reader

Widespread Mortgage Fraud, Not Homeowners, Toppled the U.S. Housing Market

realestatechannel.com

10 pointsJ3L24043 comments

The title of this submission completely misrepresents the (very weak) claims made by the article.

The article leads off with a single anecdote about one fraudulent company which stole $12 million from banks.

The remainder of the article is devoted to fraud perpetrated by homeowners (sometimes in collusion with mortgage brokers and others).

One of the few hard numbers the article gives claims that 53% of fraud is simply investors (i.e., homeowners) lying about whether they intended to occupy the property: Then in September 2005, [a study claims the] most prevalent type of mortgage fraud - 53% of all claims [...] involved an investor who falsely claimed on the mortgage application that he/she intended to occupy the property as a primary residence.

It then recounts anecdotes of mortgage brokers with baseball bats, homeowners lying on mortgage applications, and assorted small sample studies (e.g., homeowners lied on 90 out of 100 NINJA loan applications selected for study). Not to mention another study claiming 40-90% of subprime homeowners lied on their mortgage application, and significant numbers of homeowners facing foreclosure (in various small studies) also lied on their applications.

The article is weak. The title on HN is a gross misepresentation. Flagged.

I have no doubt something similar to this took place, BUT if you claim this to be the primary cause of the housing collapse, then you have ulterior motives. Like looking for a scapegoat to excuse your personal financial decisions. Or having a vested interest in the real estate market inflating back up, which would require the public to no longer be wary of making the same financial mistakes...which would require a scapegoat to excuse their personal financial decisions.

Note who's publishing this article. What do you think they want you to believe?

Got an economic idea you want to incept the public consciousness with? No matter what it is, you can find an economist somewhere who believes it. Then all you have to do is hire him to write a column.

For example, let's take the scammer in New York City whom we will call L. V. At the end of 2006, he went on a two-month buying spree in which he purchased ten investment properties in south Queens by obtaining 20 mortgages from ten different banks putting little or nothing down on any of the purchases. Apparently none of the banks was interested in checking his other purchases to see whether he had the means to handle 20 mortgages. Of course, L. V. never told the banks that he had no intention of making the payments on any of these loans.

One by one, L. V. defaulted on the loans. By the end of 2007, eight of the homes were in foreclosure. Undeterred, he continued to collect rent from tenants whom he had put into these two-family homes. When the article about his scam appeared in a December 2009 New York Daily News article, he was trying to evict tenants from two of the properties for non-payment of rent even as foreclosure actions against him were proceeding.

We need some sort of system to deter Evil landlords, such as this one. It is such a one-way street. Landlords / Property Management Companies (PMCs) almost always require credit checks, background checks, first month + last month + deposit + "fees" to move into a place they're not even getting any ownership on, just for a freaking lease!

Why shouldn't renters be able to check out their landlords, or PMCs similarly? Not just BBB stuff, but seriously comprehensive and detailed records of assets owned for passive income.

Real estate is SUCH a screwed up industry.

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