Mr. Obama versus The Real Estate Salesman

[James H. Bushart]

I now have a personal reason to like this Obama guy...

Read the poor used house salesman:

I was in total shock when I stumbled on Sen. Barack Obama’s proposed legislation STOP FRAUD Act S. 1222.


The implications for the real estate industry are terrifying. It would have been more appropriately named “Stop Real Estate Sales Act” because that is exactly what it will do.


It lumps real estate and mortgage professionals in a vague all inclusive manner to expose them to civil and criminal litigation for fraud on any transactions that utilized sub-prime loans. Penalties can be as high as $5,000,000 and up to 35 years imprison or both.

(1) CRIMINAL PENALTIES- Any mortgage professional who violates subsection (a) shall be fined not more than $5,000,000, or imprisoned not more than 35 years, or both.


(2) CIVIL PENALTIES- Any mortgage professional who violates subsection (a) shall be liable for an amount equal to the sum of all finance charges and fees paid or payable by the natural person, financial institution, or purchaser who was defrauded unless the mortgage professional demonstrates that such violation is not material.

The Stop Fraud Act defines a “mortgage professional” as;

(e) Definition- As used in this section, the term `mortgage professional’ includes real estate appraisers, real estate accountants, real estate attorneys, real estate brokers, mortgage brokers, mortgage underwriters, mortgage processors, mortgage settlement companies, mortgage title companies, mortgage loan originators, and any other provider of professional services engaged in the mortgage process.

This Will Open the Flood Gates On Litigation Against REALTORS®

Any one that has been foreclosed on would be able to sue their real estate agent and/or real estate broker for fraud in addition to asking criminal charges are brought forward.


This Bill also contains mandatory reporting for “any suspicious activity by an individual or entity”. Now we really go down a slippery slope here. I have been involved in real estate litigation before.



The case of “if I did not know I should have known” was brought forward by the plaintiff’s attorney. Now while I did prevail, I would be at risk any time I walked into a court room.


By rising the bar on possible offenses to the level of fraud it would considerable lengthens the timeline on statutes of limitations. In the state of Missouri the statute of limitations on fraud is 10 years. In some instances in can be expanded to 15 years. The State only requires that I keep records for 5 years and the IRS only requires 3 years so how am I to defend litigation on a 10 year old transaction?


If Sen. Barack Obama’s Stop Fraud Act is passed it will also raise interest rates and make home loans extremely difficult to obtain. Mortgage companies and banks will scrutinize borrowers like NEVER before.


The main stream media has really dropped the ball on this story. Sen. Barack Obama introduced this Bill back in April of 2007. This is actually Sen. Barack Obama’s second attempt to pass such a bill. His first attempt was Bill S. 2280 [109th]: STOP FRAUD Act introduced Feb. 14, 2006.



So if you know anyone involved in the real estate or mortgage industry, PLEASE sent them a link to this blog and make them aware of the professional danger they may be exposed to.


To read the Bill in it’s entirety you can do so at the PREN Real Estate Forums.


~Rhonda McMillan


Broker

[Brian E. Kelly]

Nice

[Michael Larson]

If Sen. Barack Obama’s Stop Fraud Act is passed it will also raise interest rates and make home loans extremely difficult to obtain. Mortgage companies and banks will scrutinize borrowers like NEVER before.

Some may enjoy seeing the agents and mortgage bankers get their comeuppance but it would also destroy most HI businesses.

We all rely on the sale of homes.

[Erol Kartal]

Originally Posted by bkelly2

Nice

Perhaps. But on the flip side of this, if rates get to where they were back in the late 80's (like 16%) we'll be looking for new careers. I'm unfortunately old enough to remember the last serious debacle. I was a broker back then and inspectors I knew didn't have work for 8-10 weeks at a time.

[Michael Larson]

A little history gentlemen and ladies.

[Erol Kartal]

Nice illustration, Mike. I'm older than I thought.

This current slowdown is nothing compared to some of the past bs. But then again I get this feeling I'm not the only one here who is 50...

[Brian E. Kelly]

The problem with mortgages is no one but the brokers really know how mortgage originators get paid, think yield spread premium. $$$$$

It is not a free market, the deck is stacked against the consumer.

[Michael Larson]

Originally Posted by ekartal

Nice illustration, Mike. I'm older than I thought.

This current slowdown is nothing compared to some of the past bs. But then again I get this feeling I'm not the only one here who is 50...

50??

For those who don't know what "real interest rate" is.

It's the stated interest rate on a mortgage - the rate of appreciation.

[Erol Kartal]

Back to Jim's original post, it would be great to see some accountability on the agent's side of business. They're on a free ride blaming the world's problems on home inspectors.

[Brian E. Kelly]

I read some of the blog James, looks like title insurance will also be lumped in with real estators and everyone else.
Title companies and title insurance is just a rip off as it is, I do not even know why we still need it?

Many loan originators make between 2 to 4 percent of the loan value, for what? They can make even more if the hook you up with a pre-payment penalty, sweeeet.

Not a free market.

[James E. Braun, CMI]

Originally Posted by bkelly2

Many loan originators make between 2 to 4 percent of the loan value, for what? They can make even more if the hook you up with a pre-payment penalty, sweeeet.

Not a free market.

I know some loans that pay 3% on the front side (which is disclosed to the consumer) and 3% on the back side (A kick back for charging the consumer a higher interest rate). That is 6%. Real estate companies get it. Why not mortgage companies?

[tholmes]

I believe 3% is a great rate for an inspection fee.

[Joe Farsetta]

The true problem is not the realtors or mortgage brokers.

The real problems is with the securitization of these thousands of loans.

It is the large banking institutions who are at fault.

Despite the fact that most of the loans in default are insured by AIG (Remember them? We bailed them out so they couldnt fail because they underwrote the loans), banks continue to seize homes, even though they have been paid off.

Even though short sales must be okayed by the banks, the banks are now coming after the homeowners who they allowed to sell their homes for less than owed. BTW... the banks are paid for these loans by AIG, as well.

BAnks have purchased the assets of other banks (Remember IndyMAc) for 50 cents on the dollar. They then dont allow loan modifications and foreclose or do a short sale.

So, let's say they purchased a $100,000 loan for $50,000. They allow the short sale to go through for $75,000 (they are alreadt $25k ahead of the curve.

BUT... through a sweetheart deal with the Fed, the bank is guaranteed 90% of the shortfall between what the property sells for and the value of the ORIGINAL loan. So, they now get another 90% or the $25,000 "Shortfall" between the short sale amount and the value of the loan... another $22,500.

Then they go after the lowly homeowner they forced out for the difference between the value of the short sale and original loan amount ($50,000)

Yep... this is a FACT.

Dont even get me started with abuse of authority, fraudulant assignments, violations of security agreements, and blatent securities fraud.

[Michael Larson]

Originally Posted by jfarsetta

The true problem is not the realtors or mortgage brokers.

The real problems is with the securitization of these thousands of loans.

It is the large banking institutions who are at fault.

Despite the fact that most of the loans in default are insured by AIG (Remember them? We bailed them out so they couldnt fail because they underwrote the loans), banks continue to seize homes, even though they have been paid off.

Even though short sales must be okayed by the banks, the banks are now coming after the homeowners who they allowed to sell their homes for less than owed. BTW... the banks are paid for these loans by AIG, as well.

BAnks have purchased the assets of other banks (Remember IndyMAc) for 50 cents on the dollar. They then dont allow loan modifications and foreclose or do a short sale.

So, let's say they purchased a $100,000 loan for $50,000. They allow the short sale to go through for $75,000 (they are alreadt $25k ahead of the curve.

BUT... through a sweetheart deal with the Fed, the bank is guaranteed 90% of the shortfall between what the property sells for and the value of the ORIGINAL loan. So, they now get another 90% or the $25,000 "Shortfall" between the short sale amount and the value of the loan... another $22,500.

Then they go after the lowly homeowner they forced out for the difference between the value of the short sale and original loan amount ($50,000)

Yep... this is a FACT.

Dont even get me started with abuse of authority, fraudulant assignments, violations of security agreements, and blatent securities fraud.

I agree but let's not forget the millions of people who committed fraud as they lied on their loan applications claiming income they didn't have.

People treated their homes as cash machines.

It worked until it didn't.

[Joe Farsetta]

True, Mike... but not in all cases.

Let me ask you this:

If you took out a loan and fell on hard times..
And you tried to work something out with the bank and they refused...
And your mortgage was not upside down (you had plenty of equity)...
And the bank tried to foreclose on you for missing two payments...
And they legitimized their actions based on something called a PSA...

And then you discovered that the bank never followed the terms of the PSA...

And you loan could never have legally been part of the securitized pool of mortgages thich were bundled and sold to investors...

And three years after the date that no additional loans could be added to the pool of loans, it was mysteriously assigned in violation of the PSA to a trustee in charge of the pool...

And the person who signed, claiming to be the vice president of the bank, but who was really only an employee of a title clearing house, and actually never worked for the bank, assigned your loan to the trust...

And the bank foreclosing attempts to use this instrument to seize your home....

And your actual physical original Note no longer exists...

If you were on the short-end of this foreclosure, what would you do?



Please tell me that this isn't fraud, because if it looks like a duck, walks like a duck, and quacks like a duck.... it's a duck.

These things are being exposed in the courts, and banks are starting to end-up on the losing end.
Mortgages are being forgiven, and banks are being told they have no standing to foreclose.

Personally, I believe the mortgages should be forgiven, and allow the investors to sue the firms who sold them these bogus investments. It will cost this country no more in lost jobs or disappearing credit then what we currently see. Deutsche Bank National Trust, a foreign entity, serves as trustee for many of these trusts. Imagine that...

It goes much deeper, with credit swaps. This is where the banks bet against the homeowner, because they, and the loan servicers, make more with defaults. Imagine betting (and hoping) that the homeowner will default because it improves the bottom line.

If you look at the prospectus' describng the investments, you will see that they warn investors that the mortgages will likely end in default. So, not only does the homeowner lose, but the investor loses.

This explains how folks got loans. It was rigged from the start. This explains teaser rates, ARMs, and predatory lending practices.

The only problem is that Wall Street, the f-ers who caused all of this, are making money too fast to care.

It is starting to look like a re-distribution of wealth, engineered from the top, and crashing down on America. One law firm filed over 7000 foreclosure actions in NY State alone during 2009. It is called a foreclosure mill, and for good reason. Business is apparently pretty good...