Another sample of business ethics out the window
According to this Bloomberg story, Eve Mazzarella, a high school drop-out and former maid from Seattle moved to Las Vegas and started a real estate career in the year 2000. Evidently, she and her husband are now allegedly charged with fraud. The story goes on to say that she was highlighted in the National Association of Realtors “30 under 30” list, which names the best young real estate agents in the country.
The NAR “30 under 30” article reminds me of the story of Puget Sound Business Journal and Washington CEO Magazine’s “40 under 40” story on a local young CEO.
From the Bloomberg article:
“The day before, the U.S. Attorney for Nevada had indicted the couple on 6 counts of bank fraud, later revised to 13. Prosecutors say the pair recruited fake — or “straw” — buyers to apply for loans to purchase 227 properties worth $107 million. They told the straw buyers they would pay the mortgages. Then they skimmed thousands of dollars from each of more than 432 transactions, the indictment says, stashing the cash in 80 bank accounts.”
Will the real estate community, Lending Brokers, Real Estate Brokerages or regulating bodies of each State do a better job of getting rid of the people who had a direct role in bringing down the housing market and impacting those who had nothing to do with it?
Let’s hope so Tim. It needs to be on a national level too so that these scum don’t hop from state to state…AND it needs to be the same regulation for all (nothing special for bankers or brokers or candlestick makers).
I would be interested in seeing stats on how much of this mess is based on fraud vs what percentage is on subprime.
It’s a guess, but I would think that the US. Attorney’s office in Nevada were tipped off to this fraud. How many are out there that should be investigated too?
When will the culture in real estate change so that people IN THE business stand up and say enough is enough and start to police their own? Those owners of mortgage companies know darn well what their LO’s are up to. If they don’t, they should know because their arses are on the line. Same for managing real estate Brokers.
When will seminars that dominate the sales scene change their approach from their present focus to…… “how to provide phenomenal service, foster long term business relationships, build an ethical “team” approach to your real estate practice.”
Here’s something for the NAR, NAMBA, MBA, SEC, Ratings agencies etc…:
A seminar on how to “gain back the trust of the public that we’ve so royally screwed up.”
Here’s one for ya;
http://www.10news.com/news/17817055/detail.html
A woman chained herself to her Mira Mesa home Monday morning in protest over an eviction order.
Like thousands of others in California, June Reyno and her husband took out an adjustable rate mortgage.
When the monthly payment jumped to $5,800 the Reynos defaulted on their loan.
******************************
Oh, here’s her web page…she’s a Realtor specializing in short sales.
According to this site she also makes less than $25K a year and her home is registered as a non profit/tax exempt.
http://www.taxexemptworld.com/organization.asp?tn=1305591.
I hate when I mess up good linkage… here’s the web page.
http://junereynosales.com/
Hilarious? Ironic? You tell me.
I looked at the web site. It’s sad because this woman just doesn’t get it…. that she is not a victim but a predator. It’s too bad the press didn’t do a little more research into the story.
I am really not feeling too sorry for the people who knowlingly got into Option Arm loans. They really thought they could get something for nothing and unfortunately there were real estate agents, loan originators, lenders, Wall Street companies, Fannie & Freddie, HUD and the governing body of the US happy to oblidge.
Cathy R. unfortunately, the media won’t spin the story that way. It’s us nasty loan originators that somehow didn’t allow any consumers to read any documents or research the financing on the largest investments they’ll make in their lifetime.
It’s always amazed me at how thoughtless people can be in selecting their mortgage and loan originator.
This is a classic example of what you get when you select by lowest rate alone.
According to the story, she’s lived in her home for 19 years and lost her job two years ago. That’s when she took out the ARM. It wasn’t a purchase mortgage. Sounds like she recently got a real estate license as a hopeful source of income after losing her job.
The copyright on the site is 2008. Looks to me like the people she called for help ended up hiring her.
– Will the real estate community, Lending Brokers, Real Estate Brokerages or regulating bodies of each State do a better job of getting rid of the people who had a direct role in bringing down the housing market and impacting those who had nothing to do with it?
No.
I haven’t seen any data showing that fraud was on a large enough scale to bring down the credit markets, but putting that aside – people don’t usually commit fraud in broad daylight.
I’m certainly open to suggestions, but I don’t quite know how we’re supposed to police ourselves. Should I ask the FBI to investigate the top producer at my office? What does a broker do if they get a lot of transactions from the same party – ask for, what, exactly? Maybe each transaction should be accompanied by three CMAs from local agents (to audit the appraisers)?
– It’s us nasty loan originators that somehow didn’t allow any consumers to read any documents
I’ve never lost an argument by praising my readers, but for every story I’ve ever heard about a lender who hid the docs or a Realtor who wouldn’t show the better house or whatever complaint – that same person had a dozen similar complaints about every other service provider they’d ever met. Maybe they’re just unlucky that way.
It’s like dating, or so I remember! When a girl tells you about all the other horrible boyfriends, you know you’re applying for the job of her next horrible ex-boyfriend.
No?
That’s disappointing to hear Mac. I mean, isn’t that the kind of complacency that led to this crisis? It has to start with the people who are writing the purchase & sale agreements. Agents are in a position to “conduct” the real estate sales transaction “orchestra.” I would guess that a good handful of the closed short-sales occurring all across our country were highly likely to have been triggered by people who really were not able to handle the payments. They don’t call ’em liar loans for nothing. I know that one or two of the short sales coming through our office…..payments were never made from day one.
The news of escrow people embezzling money, title shops being drug through the muck due to sham AfBA’s, embarrasses the heck out of me.
Doesn’t fraud perpetrated by agents and loan officers embarrass the real estate community? Wouldn’t it be a better solution to get them out of the business? I hear agents discuss trying to “stabilize” the market and “hold housing prices steady; bolster values.” It doesn’t work to well when we have brethren wasting communities by bogus deals.
Gosh, 23 homes here, 247 homes there, pretty soon we’re talkin’ real neighborhoods and developments being crushed by fraudulent deals and artificial appreciation.
No fraud data? We’ll baseball is over, so grab a good cup of Joe, sit down and Google ‘Mortgage and/or real estate fraud.’ FBI recently announced several large cases of fraud. The blog, Housing Wire, reported another case in Missouri involving agents and loan officers working in tandem. The FBI reported that there was a 42% increase in fraud for the 1st quarter of 2008 (I think they were comparing it to the previous quarter, IIRC). A special agent said it was “stunning” increase.
At some point does one become part of the problem, or part of the solution. Yesterday, Realogy announced (they are standing in the soup line behind banks, Detroit auto industry and others) it wanted the Fed Gov. to buy down the interest rates of millions of troubled mortgages. The question is, why are they troubled loans in the first place?
Regarding the moral hazard of this crisis triggered by housing:
“If the lunch truly is free, the demand for free lunches will be large.
Tim, with regard to Realogy’s request, I read that differently. I read they wanted the current rate of new loans to be bought down to 4.5% to increase sales to support values. I’m pretty sure I got that request in the form of an email, meaning the actual request that was made. I’ll see if I kept it.
As long as agents are trying to “bolster values
Fraud was absolutely out of control over the past five years or so. Whether it was the little white lies of over stating income a few bucks to all out street gangs with complex appraisal schemes, not to mention occupancy fraud, fraud was and is rampant in residential real estate.
Part of the problem is that the barriers to entry into the field are just entirely too low. Combine that with the amount of money to be made, a wild west sales culture, lack of oversight, and consumer ignorance, you just have a nuclear bomb waiting to explode.
For the amount of money we deal with, not with standing the personal and private information we have access to, you would think it would take more than a few credit hours of education and passing a BS test to originate mortgage loans or sell real estate. No other profession has such low expectation of it’s “professionals.”
At least 90% of the people in this business shouldn’t be here. Personally, I think it is almost criminal neglect against the public. I can honestly say that I have been to industry functions and leave just feeling dirty from having to associate with some of the people in this business.
I would venture that a SIGNIFICANT number of the foreclosures and short sales involve outright fraud, particularly occupancy fraud which is where the borrower lies about the intent of the home being a primary residence or investment property in effort to get lower rates. The antedoctal evidence is there. Look at all the vacant homes that went into foreclosure BEFORE people even moved in in parts of CA and FL. In Miami there are whole condo buildings that are damn near empty, yet I want to see what percentage of those condos were bought at “owner occupied”.
I have said it many times before, it ain’t little old ladies going into foreclosure by in large. It is fraudulent transactions for the most part.
To show you how bad it was, we had a Wells Fargo account exec for their subprime division who used to call on my office. I found out he got 87 months for $4 million in mortgage fraud last year. Before he joined Wells, he ran a massive fraud ring out of his mortgage company. Just the fact he was even working for bank as an account exec while a federal trial was pending was a shame.
Rant over…
Russ has it right!
“Part of the problem is that the barriers to entry into the field are just entirely too low. Combine that with the amount of money to be made, a wild west sales culture, lack of oversight, and consumer ignorance, you just have a nuclear bomb waiting to explode.”
For these and many other reasons, it was a system destined to cause problems.
Well…. it at least the bright side of this market is the house cleaning that comes with it. Here, here!
Russ, fraud is much more common in Chicago (is that you’re area?) than Seattle…I just read something about that…not that we don’t have our share.
– That’s disappointing to hear Mac.
Tm, you’re old enough to handle the truth.
– I mean, isn’t that the kind of complacency that led to this crisis?
Hmmm. I don’t know; what kind of complacency led to the crisis?
The American public knew less about credit default swaps and collateralized debt obligations than they know about global warming, water pollution, rocket propulsion, and how to throw the knuckleball. Complacency wasn’t the problem, ignorance was.
– Doesn’t fraud perpetrated by agents and loan officers embarrass the real estate community?
Yes.
– Wouldn’t it be a better solution to get them out of the business?
Yes.
– No fraud data?
What did I write?
– At some point does one become part of the problem, or part of the solution.
And your solution is . . .
Lookit: I don’t mean to be argumentative. But throwing our hands in the air screaming, “But something should be done!” isn’t a solution. Until we’ve decided on -something-, we have, noth-ing.
So, come up with something!
We definitely had our share of people not understanding that they were committing fraud when buying investment properties. My team walked away from several investor wannabees when we learned that they had been involved in prior transactions where they’d claim owner occupancy for a purchase to get the lower interest rate. Most were genuinely shocked when we told them that was considered mortgage fraud and a possible felony. We wouldn’t do business with them.
I agree with Tim that barriers are too low for entry into these fields as was mortgage lending up till recently. I knew people hired into mortgage jobs as sales positions focused job descriptions. That to me is a first sign of concern.
Recently I held an informal survey on Active Rain to find out how many credit hours agents need in various states. http://activerain.com/blogsview/659581/How-many-hours-does The lowest was an average of 6 credit hours per year (12 for biannual renewal). In my 5 years of RE so far my credit hours taken (renewal hours only) already would equate to about 17.5 years of minimum coursework in some states of the US. I’m thrilled to see that Washington is increasing their requirements as of 2010. http://www.teamreba.com/blog/2008/08/12/starting-in-2010-new-real-estate-brokers-will-be-giving-wa-state-the-fingerprint/
Rhonda:
Fraud was definitely out of control here in Chicago. We had entire fraud rings operated out of sham companies. Basically, gangs figured out they could open up mortgage companies, real estate brokerages, appraisals, and title companies (AND ATTORNEYS too) and through ABAs control the whole thing. Not to mention being overrun by boiler room shops.
I would bet a huge number of the foreclosure are fraud related. The fraud identified in the local chicago media represents hundreds of foreclosed homes. The one person I came across who got convicted (a wells fargo AE) had like 100 homes or something fraudulently purchased and the bulk went into foreclosure which is how he was caught.
That is why none of these bailout programs are going to work. When the lenders start really evaluating the foreclosures, the vast majority are not going to be situations that can be saved under any circumstances. The housing crisis is simply the biggest fraud ever perpetrated on the public. Nothing more.
Russ:
Welcome back!
We’ll probably find that we have our share of fraud here in the Seattle, (Lisa Bautista comes to mind), but as far as I can tell, it never reached the epidemic proportions hit in other areas, like Miami.
http://www.miamiherald.com/multimedia/news/mortgage/
The barrier to entry for LO’s (and mortgage companies/banks)was shockingly low, and the prevalent attitude that the market solves everything, and government is the only barrier to the the betterment of mankind, also greatly contributed to the problem.
Markets must be regulated, and banks need to risk their own money to make wise investment decisions.
The tide is turning. Swim hard.
I would like to point out that high barriers to entry are not necessarily an antidote to bad behavior.
I think it was pretty hard to get to be a Master of Wall Street, but that didn’t stop them from pretending that credit default swaps were actually insurance policies backed by real assets.
It’s so much easier to comprehend lawlessness at the retail level, involving hundreds of dollars, than it is to comprehend it at the national level, where billions were siphoned off.
The Merit link was funny.
For those readers that don’t know the background, here’s a decent story.
http://community.seattletimes.nwsource.com/archive/?date=20061203&slug=merit03
Roger-
How are CDS considered fraud?
Q-
Where ya been?
Full disclosure: I have never bought a CDS, and have never looked at a prospectus for a CDS.
I don’t know if they were sold fraudulently.
My understanding is that CDS are specifically exempted from regulation, from a rider authored by Phil Gramm, attached to a spending bill in 1999.
While I am sure it is an oversimplification, my understanding is that a CDS is an insurance policy purchased by an investor, to cover the investor in the event that a bond defaults. That bond could be based in mortgages, or corporate debts.
Since they were unregulated, the issuers of the CDS were not subject to the reserves requirements of other kinds of insurance policies.
Selling insurance policies without the means of paying in the event of redemption is fraud. Of course, I am not a lawyer either, but if PEMCO refuses to pay if my house burns down, saying they do not have the money, I would hire one.
I’d welcome a vetting of this simplified POV.
Did you buy or examine any proposals to buy CDS?