In a move that should surprise no one, the FBI, says CNN, has opened an investigation into Fannie Mae, Freddie Mac, Lehman Brothers Holdings Inc., and American International Group, the four companies now at the very heart of the proposed $700 billion dollar theft–I mean taxpayer bailout–plan being pushed by Bush and gang in Washington.

This apparently brings to 26 the number of financial insitutions under law enforcement scrutiny just in the past year.

CNN quotes two law enforcement officials as saying the FBI is looking for “potential fraud” by the four giant and now collapsed companies.

Faster, Faster, Faster

Meantime, perhaps the FBI should also take a closer look at why the Bush administration is in such a hurry to ram through the Congress this enormous rip-off of the American taxpayer in order to rescue some fat-cat Wall Street big wigs who drove their companies and the U.S. economy into the ground.

We are being told we must act quickly…yesterday if possible. Don’t ask any questions. Don’t provide oversight. Don’t permit judicial review. Don’t hold hearings. Don’t consult experts. Don’t hold anyone accountable. Just hand the $700 billion over to the very sleeze bags who brought the country to its fiscal knees.

Don’t help people who face forclosures. Don’t limit executive pay for the CEOs of failed companies. Don’t attach amendments to increase unemployment insurance. Don’t change the bankruptcy laws to allow judges to change the terms of a mortgage to help keep someone in their home.

No. Don’t do any of these things. Just fork over the greenbacks. Sign the big check. Shut your mouth. Close your eyes. Plug your ears. And, while you are at it, hold your nose because the stench from this crap will burn through your throat.

Recently, China executed some key industry executives who were responsible for tainted products being exported to other countries, tarnishing China’s still developing reputation.

Maybe China is on to something? The Chinese, after all, brought us citrus fruits, gunpowder, paper, fireworks and now, corporate executions. Isn’t there something to be learned,then, from the Chinese when it comes to dealing with this financial crisis??

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Tags: AIG, fannie, FBI, fraud, freddie, lehman, mortgage-fraud

The Attorney General for the State of Texas has issued numerous public warnings to homeowners facing foreclosure. The warning is simple really… “Do not sign the title to your house away to anyone claiming they can help.”

Those warnings hit me pretty good since a large portion of my business involves homeowners in pre-foreclosure. It is a common thing for an owner to deed me their house using a Warranty Deed. Furthermore, I make sure there is no possibility of fraud being involved. But the Attorney General has made it clear to NOT give up your title! Who is right? I say the Attorney General is right BUT, . . . I am not wrong.

Real Estate and Mortgage fraud are so rampant in Texas that issuing warnings to homeowners is just one step the state is taking to lessen fraud. I am not going to give the details of fraud cases that have prompted the warnings because I don’t like telling people how others committed fraud.

It is very bothersome to have to contend with homeowners when they bring the warnings up. A few less than honorable people out there make it difficult on the rest of us who go out of our way to comply with the law.

Stopping Foreclosure by Reinstating the Loan

In Texas, I teach investors how they can take over mortgages of owners in foreclosure by reinstating the loan. This is done by having the owner sign a Warranty Deed (giving me or an investor legal title to the house). The mortgage is left in place for the time being in the homeowners’ name. This stops the foreclosure for the owners, brings their loan current and once a new mortgage is obtained in my or an investors name, . . . it gives the homeowner a “paid mortgage” on their credit reports. That’s a great deal for someone who is days away from losing their house.

This plan actually leaves the owners in the house and does not increase their payments nor does it require any money from them.
This usually gets a lot of curiosity interest from investors wanting to know how it’s possible. However the purpose of this article is not to lay out the blueprint for the plan. The purpose is to show how to do legitimate business while staying away from fraud.

One major concern that surfaces when doing one of these deals where the mortgage is re-instated, left in the owners’ name and title is transferred, is the possibility of the Due on Sale clause coming up. Some investors say to put the title in a Land Trust but good luck getting a mortgage with the owners’ identity concealed.

How can you do such a deal while not raising any suspicion?
DISCLOSE! DISCLOSE! DISCLOSE!

First off, I tell everyone (and I do it myself) to urge the owners to have all documents reviewed by a real estate attorney of their choice.

THEN… I contact the lender that is foreclosing and explain the entire situation to them. Tell them EVERYTHING!
I contact the Loss Mitigation department and ask to speak to a Vice President or the highest ranking person in the department. I explain to them that I would like to reinstate the mortgage and plan to have the homeowner sign a Warranty Deed as my security. Once the loan is brought current, I intend to get a new mortgage within the next 120 days (which will then pay that lender off entirely). I tell them that I am aware such action could warrant them invoking the Due on Sale clause (and they are quick to agree). I then ask them if my plan is acceptable to them and ask for their assurance that they will not exercise the Due on Sale if I proceed. To date, only one lender has told me they would call the loan if I did that.

To summarize the scenario:
The homeowners get to stay in their house, they are not required to come up with extra money to do this and the past due balance is wiped clean. They are able to start fresh with their payments. The reassuring part for the homeowner is they feel safe and secure with the deal because they know their own lender has given their blessing and in the end, there is no reason for them or the lender to suspect any fraud or wrongdoing.

The lender has no reason to question any part of the deal because they were informed up front and allowed to say yes or no. Most lenders are all for such a scenario because they go from nearly adding a house to their REO pile to being paid in full within a few months.

So the Attorney General is right to issue warnings of potential fraud. While at the same time, I am right to disclose everything to all parties involved in the transaction because if everyone is on the same page . . . there is no fraud and everyone benefits!

Tags: foreclosure, fraud, full disclosure, homeowner, loan, real estate investing, reinstate loan, texas foreclosure, warranty deed

Last week we talked about the emergence of the selfless real estate agent. Today, we’re going to look at a piece of dirt who makes the rest of the agents out there look bad.

A real estate broker in Shakopee, Minnesota was charged with with 15 felony counts of identity theft; in addition, she filed $3 million in fake loans.

According to Freeman, “in one case, she promised to buy a piece of investment property for someone, said ‘Don’t worry. I’ll pay the mortgage and pay the rents and give you your share.’ She collected the rents, didn’t pay the mortgage and didn’t give the person any money.”

This is yet another warning to everyone to be careful out there. There are so many dubious people out there just looking to scam you, that you really need to protect yourselves. With that in mind, anyone considering investing in real estate has got to be sure that they have a real estate attorney handy.

While your lawyer can’t do too much to stop someone from stealing your identity, they can be sure that the deal you’re considering is legit, and serve to protect you by reviewing all of your paperwork. They are your first line of defense!

The part of this whole story that is most astonishing is, because this is what some call a “white collar crime,” she has not been taken into custody. She also still has her real estate license and won’t lose it unless she is convicted.

Looks like another failure of government to step up and do something. Here’s an idea . . . lets temporarily suspend her license . . . no, that would just take too much paperwork . . . we’ll just let her keep serving in a position where she can steal more money and identities.

I’m not sure who I’m more appalled at, the thief, or the authorities who fail to stop her from doing it again.

Tags: fraud, mortgage-fraud, real estate, real estate agent, real-estate-scam

BiggerPockets is proud that we’ve been able to provide a forum for possible “victims” of what some claim to be a massive real estate fraud. For the past few months tens of thousands of current and possible investors have flocked to BiggerPockets Forums to exchange information and help one another stay abreast of fast moving developments involving Pinnacle Development Partners, LLC. In addition, ex-employees and officials have also participated in the discussion, keeping interested parties in the loop. The U.S. Securities and Exchange Comission (SEC) yesterday filed fraud charges against Pinnacle and its founder, Gene O’Neal, claiming that it operated a ponzi scheme.

In the next few weeks, BiggerPockets wil be announcing an exciting new forum, where anyone dealing with real estate will be able to help one another avoid the very real dangers of fraudulent real estate and mortgage schemes.

Tags: biggerpockets, development, estate, forums, fraud, investigation, partners, pinnacle, ponzi, real, scam, SEC

In a story released today by USA Today, we learned about a new fraud that had been taking place in Virginia, where investors were tricked into signing documents to purchase properties that had been appraised at inflated values.

Countrywide Financial, who is suing the man who allegedly orchestrated the fraud, Robert Penn, “claims the defendants duped their victims by inviting them to take part in either an “investment opportunity” or a “real estate investment club.”

The lawsuit alleges the paperwork that truck drivers, retirees, factory workers and others in or around Martinsville, Va., signed eventually made them “straw borrowers” liable for bogus loans for one or more homes obtained by submitting false mortgage applications.

The victims were not given copies of the “investment” documents and were rushed into signing them after being told they needed to be quickly delivered to Indianapolis, the lawsuit claims.

“The straw borrowers were not asked to read the documents they signed, and in some cases were told there was no time for such a read, or that it was unnecessary,” the lawsuit states.

There are hundreds of legitimate real estate investment clubs that serve to educate and assist investors, but this story should serve as a warning to be careful when dealing with all potential investment opportunities.

NEVER SIGN SOMETHING BEFORE READING IT!

If someone rushes you to sign something before they let you have a look at it, they are probably not having you sign something you want to sign. This may seem obvious, but any legitimate person you will deal with understands the importance of due diligence, and will give you adequate time to review any related documents and paperwork.

Be careful America . . .

Tags: clubs, estate, fraud, investment, real, Real Estate Investing, scams

After a long day of rest, I’ve emerged from my sports cocoon to bring you my Sunday wrap up. I’d like to first congratulate Tiger Woods for his 4th straight tournament win, and I want to wish Andre Agassi good luck in the final tournament of his career. Ok . . . back to real estate.

- Here is a sad case of irony:
The Boston Globe covered the story of Jose Felipe, whose credit was destroyed by a mortgage consultant who used his name and social security number.

“Some brokerage firms, which promise borrowers “100 percent financing” and “guaranteed home ownership,” operate without required state licenses. And because the state licenses mortgage companies and their owners, and not the loan officers who work for them, it is difficult for consumers to check the record of an individual officer. In contrast, the state has a website where consumers can easily review the licenses and disciplinary records of dozens of other professionals, including accountants, veterinarians, and manicurists.”

So the state of Masachusetts lets you check up on the lady who does your nails, but not on the guy who has complete access to all of your personal financial records. SAD!

- In Arkansas, Senator Kim Hendren said “he will try again in the 2007 state legislative session to reform the state’s statutory foreclosure procedures. Reform is needed since foreclosure situations are apparently becoming more common, he said.” Isn’t it great how proactive our leaders are? Now that the market is topping over again, the lawmakers start to notice. Where was Senator Hendren when the local sheriff was buying his $1 million mansion for no money down? Who was protecting the homeowner back then?

After a year of passing blame, confusion, elections, and general chaos, the city of New Orleans is setting a deadline for gutting and cleaning up homes damaged from Hurricane Katrina.

“City officials have set Tuesday the storm’s first anniversary as the deadline for homeowners to gut or otherwise clean up their properties. Landry is among those hoping the deadline will spur a cleanup that will lead to more redevelopment and repopulation after the exodus that followed Katrina. “The city needs to do what it needs to do,” councilman Arnie Fielkow, who helped push the ordinance setting the deadline, said at a meeting Friday. People who don’t comply with the deadline after being put on notice face a range of possible penalties, from liens being placed on their property to the seizure or destruction of homes.”

Exceptions to the deadline include residents of the Lower Ninth Ward, and those with an “acceptable” excuse. The city needs to set a deadline, or things will go on forever, but the government needs to step in and help all the people who are left to fend for themselves against the insurance companies who find any reason not to pay a claim.

- I just read a staggering piece of information from Black Enterprise: “Membership in the National Association of Realtors has increased by 75 percent in the last 10 years. The number of real-estate agents in the United States increased by 26 percent between 2003 and 2005 and 40 percent over the last five years to about 2.5 million.” I wonder what that number will look like as things settle down. Anyone?

- I’ll close with a peek at a nice little piece from REIBlog.com, listing Best Rules for Your Success in Income Real Estate. The list includes advice like “Have strict rules for your tenants” and “Keep accurate records.” While most of the points are fairly obvious to the seasoned investor, it is a good start for newbies.

Until next time . . .

Tags: foreclosure, fraud, gut, gutting, katrina, lower-ninth-ward, mortgagefraud, neworleans, Realtors, reform, tenants