Mortgage fraud didn’t really matter when everyone was pigging out at the trough. So you fudged a few numbers! No biggie, put it back on the market in one year for 20% more and cover your 6% selling cost. This was the case for the last five years but what happens when equity reverts to zero or even worse, negative?
“But now, with prices flattening out or declining, those without sufficient equity could be forced to sell for a loss or even default on payments. That could accelerate any downturn in the market by swamping it with foreclosed and bargain-priced properties.”
Whoops! I thought real estate climbed high in the sky like the nursery rhyme of Jack in the Bean Stock. But as the recent reports by DataQuick, NAR, and CAR all point to record inventory increases and prices stalling and even worse declining year over year in places like San Diego. But what is the true source of this? I mean everyone that used a stated income loan told the truth so why worry…right?
“One lender recently compared 100 stated-income loans with the borrowers' tax returns and found that only 10 of the borrowers were telling the truth about their wages, according to Mortgage Asset Research Institute, a division of data firm ChoicePoint Inc.”
Are you meaning to tell me sir, that only 10% of stated income borrowers in California actually told the truth? I haven’t been this shocked since I was told Santa Clause was only my uncle in an outdated Superman costume. Well, I’m sure even though they fudged the numbers, they only did it by adding a few thousand for the closing cost…
“Sixty of the borrowers had exaggerated their incomes by more than 50%, according to the institute, which didn't identify the lender.”
I let out a belly laugh when I read this part! So now we know how people on a median income where able to afford a home ten times their annual income; they simply inflated their income to that level. No wonder why I couldn’t reconcile facts from the Census Bureau with the housing syndicate numbers. The housing syndicate is the Arthur Anderson to the Enron of housing. But I’m sure the people that made out during this boom wisely invested their earnings…
“Then there are cases of outright theft. Kenneth C. Ketner, who ran a Newport Beach mortgage company, pleaded guilty last month to diverting about $9 million in borrowers' funds. Prosecutors said he used some of his loot for a $244,000 Ferrari.”
Now I know how my next door neighbor was able to afford a 5-series on her teacher’s salary!