Posts Tagged ‘Real Estate’

Woman Buys House For $1.75 On EBay [Money Meltdown]

02 Oct

Joanne Smith from Chicago now owns an abandoned home in Saginaw, Michigan, and she only paid $1.75 for it on eBay. Well, there's also $850 in "back taxes and yard cleanup cost," reports MSNBC. Smith says she hasn't seen the house yet or visited the town, but we're thinking hello summer home! Or maybe it's a good place to put the parents when they retire.

The company that auctioned the home wasn't available for comment, so we'll be curious to see whether they try to squirm out of the deal. Like, oh, maybe saying a bunch of Canadianized killer bees moved in.

"$1.75 eBay bid gets abandoned Michigan home" [] (Thanks to Scott!)
(Photo: MSNBC)

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WaMu Lent $24.5 Million To One Shady Family Of ID Thieving House Flippers [Mortgage Fraud]

24 Sep

If you're expecting this story to be about the worst bunch of shady house flippers from the height of the credit boom, you'll be disappointed. This story is about a family that took WaMu for huge amounts of money by buying homes and selling them to their friends and other family members for grossly inflated prices — and pocketing the profit while the homes fell into foreclosure. They did this as the California real estate market was imploding, and after WaMu had announced that it had tightened its lending standards.

The story begins several years ago, when Vijay and Supriti Soni were found guilty of forgery, falsifying real estate documents, identity theft and grand theft. According to court documents, the Sonis "obtained confidential information from various people – one of whom worked for Vijay and the rest who were clients for properties or mortgages – and then used it to acquire furniture, loan proceeds and commissions, real estate deeds and commissions, a Mercedes Benz automobile and cash for themselves."

So when the real estate bubble began to collapse, the Sonis saw an opportunity, and WaMu didn't do a criminal background check.

From the OC Register:

In July 2007, Vijay and Supriti Soni of Corona del Mar paid $440,000 for a home at 2129 W. Civic Center Drive in Santa Ana.

Five weeks later, they resold the house to Javier Hernandez – the family gardener and handyman – for $660,000. That's a 50 percent gain in 38 days – at a time when real estate prices in Santa Ana were plunging.

But the lender that financed both mortgages – Washington Mutual Bank – took a bath. In March of this year Hernandez's loan went into default and in July the bank foreclosed. On the trustee's deed, the bank listed the home's value at $377,137 – $220,000 less than the outstanding loan.

Records show that Washington Mutual, America's largest savings and loan and one of its most precariously perched lending institutions, financed at least 43 mortgages worth $24.5 million on properties bought and sold by members of the Soni family since early 2007.

So why didn't WaMu's new, stricter lending policies exclude the Sonis?

Experts told the OC Register that WaMu:

* Allowed financing of property flips that occur less than 90 days after purchase. The Federal Housing Administration imposed a ban on financing 90-day flips in 2006. The FHA also requires a second appraisal for homes sold at a 100 percent gain less than 180 days after purchase.
* Relied heavily on imperfect fraud detection software. Computers are good at flagging statistical aberrations – such as unrealistic income statements – but can be deceived by knowledgeable and determined insiders.
* Did not check criminal backgrounds. The Sonis had been convicted in 2003 of numerous felonies for a real estate fraud scheme. WaMu checks criminal backgrounds of loan originators, such as outside mortgage brokers, but not borrowers.

Last month, District Attorney investigators raided the family's homes and business offices. Now, prosecutors are investigating the Sonis and other members of their family for criminal behavior.

"Unfortunately, we are back looking at these characters again," said Doug Brannan, the deputy Orange County District attorney who prosecuted the Sonis in 2003.

The OC Register says that the Soni's effectively created their own market in Santa Ana, selling so many homes to each other for inflated prices that the sales were "later used by appraisers to give credibility to high asking prices for other properties in the area."

Here's an example:

Lohia bought the bank-owned house at 827 S. Flower for $249,500 on Jan. 4. She sold it 20 days later for $575,000 to her daughter, Suniti Shah, who financed the purchase with a $488,750 Washington Mutual mortgage.

That was a 121 percent increase in less than three weeks.

"Selling to each other, that's something an appraiser should definitely discover," said Mike Sanders, a Laguna Beach real estate appraiser and expert witness in property value litigation cases. "If the appraiser finds all the same people's names on transactions, then that's something suspicious."

WaMu loaned millions to O.C. home flippers with fraud history [OC Register]

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Facing Foreclosure? Buy A Second Home! Wait, What? [Mortgage Meltdown]

08 Sep

ABCNews says that more and more people who are facing foreclosure are just buying cheaper homes and then just walking away from their original mortgage. It only works for people who can afford the down payment on a new home and carry both mortgages until they're in the new home, but for some people whose payments are about to balloon, it's the most attractive option out there right now.

From ABCNews:

Eble owes $334,000 on his first house, which is now worth only $219,000 and is still dropping in value. He has an adjustable rate mortgage that has doubled to more than $4,000 a month, more than Eble can afford to pay.

So before the bank forecloses on his first house he is taking advantage of falling real estate prices to buy a new home for $285,000, with a fixed rate mortgage he can afford. Once inside the new home, he can either sell the first property for a huge loss to the bank or walk away completely and let it slip into foreclosure.

This exit strategy only helps homeowners who can afford the down payment on the second home as well as carry both mortgages until they are in their new home.

Like Jim Eble, homeowner Kim Hinske just bought a new home — for $280,000 — as a way to get out of an expensive mortgage.

"Yes, it's a scary thing, but I know that my family's taken care of 'cause we have another house, a bigger house and a mortgage that's less," Hinske said.

ABCNews says that the practice is prompting lenders to improse more strict guidelines for approving a second mortgage. A spokesperson from RealtyTrac, the firm that compiles foreclosure statistics, says that the trend is caused by desperation on the part of both borrowers and lenders.

"Desperate people do desperate things and again, we're at a point now where the relationships between the borrowers and lenders really seem to have devolved into a survival of the fittest mode," said Rich Sharga, a spokesman for RealtyTrac, an online marketplace for homes in foreclosure.

In Foreclosure? Buy a Second Home [ABCNews]
(Photo: stirwise )

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