ING Bank suing under RICO statutes to recover losses by alleged local real estate fraud ring.

Here is the article from the Seattle Times.

Excerpt:

In one deal, the bank loaned a borrower $935,000 to buy a Tacoma house for $1.35 million — a house that, according to the real-estate Web site Zillow, is valued higher than 99 percent of homes in its ZIP code. Nationwide Home Lending was paid nearly $30,000 in fees on that loan.

I’ve just dropped an entire commentary I wrote within this post regarding the fantasy idea some people believe that our local area is somewhat insulated from the garbage and degenerates destroying our markets and economy due to greed and fraud.

In essence, my post can be wrapped up in these questions:

  1. Ethically, is this industry too far gone to recover any resemblance of credibility, trust and moral foundation?
  2. How will the real estate brokers weed out the bad actors? We know DFI is going after loan officers and others.

Fortunately, I know and work with quite a few agents and loan officers who genuinely try to do their very best for their customers. Unfortunately, many of them and others who work in real estate are caught in the enormous wake of the problems the fraudsters have created.

21 thoughts on “ING Bank suing under RICO statutes to recover losses by alleged local real estate fraud ring.

  1. “I’ve just deleted an entire commentary regarding the fantasy idea some people believe that our local area is somewhat insulated from the garbage and degenerates destroying our markets and economy due to greed and fraud.”

    I don’t understand that part of your post. Did you add it after deleting a comment here?

  2. As for real estate Brokerages its very easy Tim. Take away the “Golden Carrot” or at least diminish it greatly and the credibility of Realtors will be restored. The real estate profession MUST and WILL rely on Lead Generation going forward.

    We will all look back and laugh at the 6-7% insanity that was. Good Bye NAR, MLS, and many large Brokerages within the next 5 years.

    Welcome in the new age of real estate powered by Google and Yahoo. I can hardly wait.

  3. As for real estate Brokerages its very easy Tim. Take away the “Golden Carrot” or at least diminish it greatly and the credibility of Realtors will be restored. The real estate profession MUST and WILL rely on Lead Generation going forward.

    We will all look back and laugh at the 6-7% insanity that was. Good Bye NAR, MLS, and many large Brokerages within the next 5 years.

    Welcome in the new age of real estate powered by Google and Yahoo. I can hardly wait.

  4. I’m not sure there’s a 100% effective solution for the short or medium term. But there is a solution for the longer term, and that is a better educated public and the return of moral hazard.

    When market participants better understand the whole of what they are becoming involved in, have some skin in the game, and face real risk of loss or other penalty for bad decisions, then things will change. But when there wasn’t any perceived risk, you didn’t have anything to lose, and if you were inconvenienced there was a good chance the government would come along and bail you out, why not go for it? Many people had nothing to lose and much to gain. And we’re surprised at the outcome? Actions have consequences. We rigged the game, and now folks are upset at the results? Come on!

    What future expectations do we set by our actions now? No penalties or consequences for the vast majority offenders, bailouts at all levels, politicians working to re-establish the same conditions that led us to the current mess by re-inflating home values and credit. That’s not corrective, it’s disfunctional.

    How do you vote? Have you ever written or called your representative, congressman, or Governor? Maybe that’s why we’re in this pickle. There’s a great quote- “all it takes for the forces of evil to rule the world is for enough good people to do nothing.”

    Like it or not, we, by our passivity and need for approval, are the problem.

  5. I’m not sure there’s a 100% effective solution for the short or medium term. But there is a solution for the longer term, and that is a better educated public and the return of moral hazard.

    When market participants better understand the whole of what they are becoming involved in, have some skin in the game, and face real risk of loss or other penalty for bad decisions, then things will change. But when there wasn’t any perceived risk, you didn’t have anything to lose, and if you were inconvenienced there was a good chance the government would come along and bail you out, why not go for it? Many people had nothing to lose and much to gain. And we’re surprised at the outcome? Actions have consequences. We rigged the game, and now folks are upset at the results? Come on!

    What future expectations do we set by our actions now? No penalties or consequences for the vast majority offenders, bailouts at all levels, politicians working to re-establish the same conditions that led us to the current mess by re-inflating home values and credit. That’s not corrective, it’s disfunctional.

    How do you vote? Have you ever written or called your representative, congressman, or Governor? Maybe that’s why we’re in this pickle. There’s a great quote- “all it takes for the forces of evil to rule the world is for enough good people to do nothing.”

    Like it or not, we, by our passivity and need for approval, are the problem.

  6. Remember the time all that money fell out of the Security Truck? There were lots of answers to: “What would you do if a bunch of money fell at your feet. and the keeper of the money drove off without looking back?”

    Sometimes I think a lot of what happened was people picking up money off the street that someone was careless with, and all the ancillary services that profited are like the people who would give it back…but want a reward/finder’s fee. Would they give it back if no one was looking for it…if no one noticed it was gone?

    How many times did we hear, “I can’t believe that house appraised at that price!” I can’t believe the lender approved that loan!”

    I’ll never forget the lesson in school that taught me that the person who leaves money sitting out (as temptation to some weak soul) was just as guilty as the person who then takes it.

    How about arresting the guys who taught the seminars and wrote the books about buying a bunch of homes with no money? Some of us knew that zero down was only for “owner occupied” loans. But how were “most people” supposed to know that, when the books and seminars and infomercials said otherwise?

    A market can’t go up holding a huge pocket of empty value as it did, if the lenders and appraisers…all of them, werent’ “willing participants”.

  7. Two things struck me as comment-worthy in the Times story (thanks for bringing it to light here, Tim)

    First, that ING got burned in the first place. While they had one of the few very competitive true Jumbo Rates during that period (above the current conforming Jumbo Rates of $506K), in most other respects, I considered them as one of the more conservative and cautious lenders out there, (higher FICO scores, lower LTVs, careful underwriting).

    The other aspect that needs to be highlighted is the unusual and apparent complicity of ALL parties: The defunct escrow company (run by a lawyer), the bankrupt and oft investigated appraiser, the greedy broker, the bogus employer, and the borrowers. All claim innocence, yet it is hard to believe those claims, based on the information presented.

    “ING alleges this scheme targeted multiple financial institutions and involved a mortgage broker, an unlicensed escrow company, title insurers, tax preparers, accountants, appraisers, borrowers and shell corporations. Even an auto shop was involved, the bank alleges.

  8. Two things struck me as comment-worthy in the Times story (thanks for bringing it to light here, Tim)

    First, that ING got burned in the first place. While they had one of the few very competitive true Jumbo Rates during that period (above the current conforming Jumbo Rates of $506K), in most other respects, I considered them as one of the more conservative and cautious lenders out there, (higher FICO scores, lower LTVs, careful underwriting).

    The other aspect that needs to be highlighted is the unusual and apparent complicity of ALL parties: The defunct escrow company (run by a lawyer), the bankrupt and oft investigated appraiser, the greedy broker, the bogus employer, and the borrowers. All claim innocence, yet it is hard to believe those claims, based on the information presented.

    “ING alleges this scheme targeted multiple financial institutions and involved a mortgage broker, an unlicensed escrow company, title insurers, tax preparers, accountants, appraisers, borrowers and shell corporations. Even an auto shop was involved, the bank alleges.

  9. Time:

    Opportunity attracts criminals.

    I don’t know if fraud if growing here. I suspect the opposite, based on the increased scrutiny.

    As one of the last areas of the country to have home prices decline, it was inevitable that we would have fraud uncovered here.

    As many have mentioned, rapidly rising home prices covered up a lot of fraud, that is being revealed now (imagine a VERY low tide at Mee Kwa Mooks Beach at Alki!)

  10. Tim you put up another good post in the wrong place.

    It just gets worse at the Rain City Guide.

    There has always been fraud in the Real Estate business. As the dollar amounts went up along with the number of transactions it became more obvious.

    There are also some very nice, well intentioned people who do a lot of damage to the real estate business. The National Association of REALTORS is a good example. They are as guilty as a Skyline Properties for what has happened in the past ten years.

    Too many agents, too many loan originators, too many builders, too many developers, too many speculators, and too many investors made every body an expert. There has been no over sight.

    The system is that the Broker is liable. Brokers have been running a popularity contest for way too long. Managing Brokers have hired sixty agents to an office with no way to keep track. There is class room education without mentoring.

    I think that a new agent should be partnered or work for an experienced agent for at least a year. Brokerages should be held accountable for transactions. There needs to be more government over sight at this point. The industry has shown they will not self regulate. Sorry Scotsman, that one was for you, but I think that is correct.

    Great post.

  11. Tim you put up another good post in the wrong place.

    It just gets worse at the Rain City Guide.

    There has always been fraud in the Real Estate business. As the dollar amounts went up along with the number of transactions it became more obvious.

    There are also some very nice, well intentioned people who do a lot of damage to the real estate business. The National Association of REALTORS is a good example. They are as guilty as a Skyline Properties for what has happened in the past ten years.

    Too many agents, too many loan originators, too many builders, too many developers, too many speculators, and too many investors made every body an expert. There has been no over sight.

    The system is that the Broker is liable. Brokers have been running a popularity contest for way too long. Managing Brokers have hired sixty agents to an office with no way to keep track. There is class room education without mentoring.

    I think that a new agent should be partnered or work for an experienced agent for at least a year. Brokerages should be held accountable for transactions. There needs to be more government over sight at this point. The industry has shown they will not self regulate. Sorry Scotsman, that one was for you, but I think that is correct.

    Great post.

  12. Believe or not, Tacoma does have some higher end homes…I’m guessing it would have to be waterfront or something “special” to fetch that price. $30k in fees…I can’t imagine. It would be nice to see an actual HUD when numbers like this are thrown around.

  13. Great comments.

    Roger, I yoyo back and forth about some of the key players. The lending industry probably is ground zero, but there are many complicit actors within the transaction.

    Scotsman, you’re analysis is right and it truly is a colossal mess. You should see some of the losses these lenders are reaping.

    Ray, I don’t know how easy it is to move the “titanic” which is the psychology of the consumer. Making people realize that there are other options out there is a difficult thing. But who knows? Perhaps this market crash, correction or however one defines it, will be the impetus for people to see what alternatives are out there.

    Rhonda, LOL….$30K in fees? Does that surprise you? Today I went down memory lane as I was working in our storage building containing our files. Pulled some 2004 and 2005 files just for fun. Kind of like getting a box of chocolates. You just never know what surprises you’ll get. So I reached in a box and just grabbed any file. I even saw a couple New Century files!

  14. Great comments.

    Roger, I yoyo back and forth about some of the key players. The lending industry probably is ground zero, but there are many complicit actors within the transaction.

    Scotsman, you’re analysis is right and it truly is a colossal mess. You should see some of the losses these lenders are reaping.

    Ray, I don’t know how easy it is to move the “titanic” which is the psychology of the consumer. Making people realize that there are other options out there is a difficult thing. But who knows? Perhaps this market crash, correction or however one defines it, will be the impetus for people to see what alternatives are out there.

    Rhonda, LOL….$30K in fees? Does that surprise you? Today I went down memory lane as I was working in our storage building containing our files. Pulled some 2004 and 2005 files just for fun. Kind of like getting a box of chocolates. You just never know what surprises you’ll get. So I reached in a box and just grabbed any file. I even saw a couple New Century files!

  15. Tim, $30k in fees totally surprises me…or at least I find it repulsive. But again, are they including prepaids–did the home owner insist on paying several discount points? It’s a large loan amount… we don’t know if the bulk of the fees went towards the originator…however, the article certainly wants us to believe that.

    I had to move into a cubicle at Mortgage Master…I’m going through and finding some gems too… the prize: Wachovia with a “no credit score” loan….guess Wells Fargo has those time bombs now.

  16. Tim, $30k in fees totally surprises me…or at least I find it repulsive. But again, are they including prepaids–did the home owner insist on paying several discount points? It’s a large loan amount… we don’t know if the bulk of the fees went towards the originator…however, the article certainly wants us to believe that.

    I had to move into a cubicle at Mortgage Master…I’m going through and finding some gems too… the prize: Wachovia with a “no credit score” loan….guess Wells Fargo has those time bombs now.

  17. Thanks for posting something about that article, Tim, we read it here in my team with a myriad of feelings: disgust, joy, relief, etc.

    Disgust – because we’d heard of people doing junk like this and it made us sick. We walked away from prospective clients who tried to ask us to be involved in false appraisals, lending, etc.

    Joy – because we’re glad that this story might wake people up who’ve been part of these deceptive practices and depress some of the greed that’s been churning through the industry over the past many years.

    Relief – because someone was finally bringing this to the public’s attention. I tried to do this about a year ago (14-15 months) when I was being interviewed by the Seattle Times for a different story. The reporter seemed interested and said she’d run by her editor but she never called me back.

    To the guy who blames NAR – I’ll just say that not all agents are REALTORS(R), who are held to a code of ethics that goes beyond state licensing laws, and I’m going to guess this Skyline agent wasn’t one of our members.

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