by Calculated Risk on 4/13/2009 06:29:00 PM

Here is the 2nd part of the VoiceofSanDiego article: A Staggering Swindle: How It Could Happen in 2008

In 2008, when the loans were made to McConville's buyers, some of the only companies still willing to buy these bundles of mortgages were Fannie Mae and Freddie Mac, even though the mortgage mess had affected them, too.

At the tail end of McConville's deals, last September, the federal government took over Fannie and Freddie, assuming more direct control of the companies' day-to-day operation and pumped in funding to absorb their losses. Now the taxpayers own 79.9 percent of Fannie Mae and Freddie Mac.

"You and I are getting stuck with these inflated loans, via Fannie and Freddie," [Real estate appraiser Todd Lackner] said.

There is a way out, as long as the smaller lenders who made the loans to McConville's buyers still exist. On any loans Fannie and Freddie bought, if they discover fraud or faults in underwriting in the loans, they'll send them down the chain, requiring the investor that sold the loans to the giants to buy them back. Ultimately, the original lenders might face those buybacks, said Michael Lea, a former chief economist for Freddie Mac.

But the small lenders who made these mortgages might not be in business anymore -- like Nazari's All American Finance.

Ask Wall Street what happens when they push back loans to the small lenders - they just close up shop.

Here was Part I: Rented Identities, Extravagant Prices and Foreclosure: A Post-Boom Real Estate Scam

And a related article: Mafia-Esque Charges Brought Against Alleged Mortgage Fraud Ring

by Calculated Risk on 4/13/2009 04:29:00 PM

From MarketWatch: Goldman Sachs swings to profit, plans $5 billion offering

Goldman Sachs Group Inc. said Monday it swung to a profit in the first-quarter, and announced it has commenced a public offering of $5 billion of its common stock. Goldman Sachs said net earnings for the period ended in March were $1.8 billion ... compared to a loss of $2.1 billion ... in the same period a year earlier.

The $5 billion will be used to repay the TARP money Goldman received last year.

by Calculated Risk on 4/13/2009 04:09:00 PM

From Oregon.gov (ht Justin):

This graph is from Oregon’s Employment Situation: March 2009 and shows the Oregon unemployment rate since Jan 2000.

The unemployment rate is at the peak level of the 1982 recession - the highest since record keeping started in 1947. The unemployment rate is increasing rapidly, and the rate of increase appears to be accelerating.

Oregon’s seasonally adjusted unemployment rate rose to 12.1 percent in March from 10.7 percent (as revised) in February. The state’s unemployment rate has risen rapidly and substantially over the past nine months, from a rate of 5.9 percent in June 2008.
...
Manufacturing shed 2,100 jobs in March, during a time of year when a flat employment pattern is typical. Employment stood at 171,600 in March, which was by far the lowest employment level since comparable records began in 1990.
...
Construction losses steepened, dropping 1,700 jobs at a time of year when a gain of 700 was the expected normal seasonal movement. The rate of seasonally adjusted losses in construction has quickened, as the industry is down 12,600 jobs or 13.6 percent over the past six months.

Seasonally adjusted construction employment, at 80,000, is now below its level of approximately 83,000 jobs seen during much of 1997 through 2000. Despite a drop of more than 25,000 jobs since reaching its peak in 2007, construction is still slightly above its low point over the past dozen years—75,500, which was reached in June 2003.
...
Oregon’s seasonally adjusted unemployment rate rose to 12.1 percent from 10.7 percent in February. This tied Oregon’s unemployment rate in November 1982, the highpoint of the early 1980s recession. While historical records prior to 1976 are not exactly comparable, it appears clear that the 12.1 percent level is Oregon’s highest since 1947, when the Employment Department first started publishing unemployment rates.

by Calculated Risk on 4/13/2009 03:00:00 PM

From Bloomberg: Manhattan Apartment Rents Fall as Unemployment Rises

Manhattan apartment rents fell as much as 5.9 percent in March from a year earlier as rising unemployment damped demand, Citi-Habitats Inc. said.
...
Rents for studios dropped 2.1 percent to an average of $1,812, while those for one-bedroom apartment fell 5.9 percent to $2,595. The cost of renting two-bedroom homes declined 2.2 percent to $3,631 and three-bedrooms fell 1.6 percent to an average of $4,670.

The average declines for March don’t reflect concessions offered by landlords, such as a free month’s rent, that lower the overall cost, [Gary Malin, president of Citi-Habitats] said.

“There is a greater degree of price decline than those numbers show,” he said.

Some asking prices are falling even faster. From Amanda Fung at Crain's on New York: Big landlord takes hit on falling apt. rents

Since February alone, Equity Residential has lowered its Manhattan asking rents by an average of 13%, said Michael Levy, an analyst at Macquarie. That reduction came on top of a 15% cut over the previous year.

by Calculated Risk on 4/13/2009 01:49:00 PM

Here is another story from VoiceofSanDiego: Mafia-Esque Charges Brought Against Alleged Mortgage Fraud Ring

Federal prosecutors on Tuesday announced unprecedented charges against individuals involved in an alleged mortgage fraud ring involving 220 properties in San Diego County, with total purchase prices topping $100 million.

The 24 defendants were all charged with participating in a "corrupt enterprise" under a federal law created by the Racketeer Influenced and Corrupt Organizations (RICO) Act...

... defendants include several real estate professionals ... a public notary ... a licensed real estate agent ... a licensed real estate appraiser ... a CPA; and ... registered tax preparers.
...
Prosecutors also name several straw buyers as participants in the corrupt enterprise ...

This is a different case than the previous story, but notice that the straw buyers are facing charges too. "Lend" out your good credit, sign false documents - and face prosecution and jail time.