by Bill McBride on 7/26/2009 09:33:00 PM
Sunday, July 26, 2009
Fraudulent property flippers had an unlikely accomplice during the real estate boom -- the lending industry."It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"
A yearlong Herald-Tribune investigation into thousands of suspicious Florida flip deals found that lenders of all kinds approved risky deals and ignored obvious red flags for mortgage fraud.
What makes the flipping fraud so egregious is not just that it happened, but that it would have been so easy to stop.
Using public records and Internet searches, the Herald-Tribune identified hundreds of deals that exhibited classic red flags for fraud. They include sales between family members and business partners in which prices increased $100,000 or more overnight. In other cases, flippers repeatedly traded properties from their company to their own name, each time increasing the price and the amount they borrowed.
Lenders knew they were writing bad loans, but did it anyway because they were making so much money on underwriting fees, said Jack McCabe, a Deerfield Beach-based real estate consultant ...
Upton Sinclair, 1935, "I, Candidate for Governor: And How I Got Licked"
Posted by Bill McBride on 7/26/2009 09:33:00 PM