Wednesday, June 11, 2008

Mortgage Fraud Call Out

Saw this little tidbit in the Wall Street Journal:

Some Buy a New Home to Bail on the Old

By NICK TIMIRAOS, June 11, 2008

Next month, Michelle Augustine plans to walk away from her four-bedroom house in a Sacramento, Calif., subdivision and let the property fall into foreclosure. But before doing so, she hopes to lock in the purchase of another home nearby.

"I can find the same exact house as what I live in right now for half the price," says Ms. Augustine, 44 years old, who runs a child-care service out of her home. She says she soon will be unable to afford her monthly payments, which will jump to $4,000 from $3,300 in August, and she doesn't want to continue to own a home that is now worth $200,000 less than what she paid for it two years ago...

In some cases, homeowners are coached through the buy-and-bail process by real-estate agents and brokers who see nothing wrong with it. Some blame the phenomenon in part on lenders' unwillingness to cut deals or restructure loans made when home prices were inflated. "It's just a business decision," says Linda Caoili, a Sacramento real-estate agent who is working with Ms. Augustine and others who are considering walking away from their mortgages. "If you're upside-down $250,000, why would you keep it? It just doesn't make sense."
Linda Caoili is an agent with Re/Max Gold in Natomas. She is also a "certified loss mitigator" (whatever that is) and "counsels struggling homeowners facing foreclosure and offers seminars at local bookstores with titles such as 'Foreclosure is Not a Dirty Word' and 'Foreclosure is Not the End of the World.'" She is also a member of NAR, who's code of ethics includes "Be honest with all parties in the transaction – not just with you, as his or her client, but also with the other real estate practitioner and his or her clients. For example, if REALTORS® represent a buyer with a spotty credit history, they can’t be dishonest with sellers about this fact."

One would assume that "being honest with all parties" includes the lender as well. I'm sure she advises her clients to disclose the walk-away plan to the lender on the new property. Because, to suggest otherwise would violate her code of ethics, as well as expose her clients to possible federal Fraud For Property charges. She wouldn't want that, I'm sure.

20 comments :

Buying Time said...

Today seems to be Sacramento day in the WSJ real estate section...

http://blogs.wsj.com/developments/2008/06/11/foreclosures-make-up-majority-of-sales-in-sacramento/

PeonInChief said...

Linda Caoili was the realtor who suggested that owners facing foreclosure could rent the place out until the foreclosure sale. I assume that her clients would tell the tenants that the house was in foreclosure and that they'd probably have to move within a few months too. Yeah.

Patient Renter said...

I assume that her clients would tell the tenants that the house was in foreclosure and that they'd probably have to move within a few months too.

Exactly! The idea that Ms. Caoili advises her clients to keep all parties informed about their true intentions is ridiculous. If all parties are informed, the "buy-and-bail" doesn't work.

Not that I'd expect a slimey entity such as the NAR to care...

Max said...

If all parties are informed, the "buy-and-bail" doesn't work.

I think she thinks she has her legal ass covered. If she informs her buyer of the possible issues, then in her mind, she did her duty.

Unfortunately, the law doesn't see it that way, if she profits from the transaction. This is why they invented RICO.

Doubtful that she or her client will ever be charged, but that's the chance they take. Advertising their intent to defraud in a national newspaper is a direct taunt to law enforcement. Also, if her new prospective lender googles her name, she'll never get the loan.

Anonymous said...

Linda Caoli has lost homes and commercial property to lenders. I think that qualifies her as a loss specialist. She bought a building at Duckhorn in Natomas and opened a real estate office in early 2006. Of course that business went under and she lost the building.

Deflationary Jane said...

Honestly, having your name attached to this in print is a really bad idea. All it takes is one person with Elliot Spitzer type apparitions to make her life a living hell. Oh and don't forget to pick up the reckless forecloser too on your way to the courthouse.

Deflationary Jane said...

BTW, here is her business

http://www.overtherainbowcirclesofexcellence.org/about.html

Max said...

Oh and don't forget to pick up the reckless forecloser too on your way to the courthouse.

I wonder if someone could comb through her past transactions to see if she's done this before. How many clients has she represented that went on to default on former primary residences? All you need is a couple of former clients with fraudulent loans to testify that the "Realtor told me to."

Sold in '05 said...

No law is being broken, and none of these thousands of people will be charged with anything. Corporations make these same decisions every day. Default is default, it is a business decision, and in our society it is not punished as a crime. What company or country for that matter has EVER pre-announced it's "intention" to default? News of corporate default is never found in the words spoken by the PR types until after the fact. The only way to foretell the action is to study the numbers and then evaluate the probabilities for various options. Banks are supposed to do this same analysis before they make loans.

Why should we hold individuals to higher standards? Do we think justice is being served by forcing them to keep paying on some worthless pile of junk when there are other perfectly legal options?

IMO, anyone who was caught up in the bubble hype, bought a house in the last four years, and now finds themselves with a loan that is equal to five or six times their annual gross income for a stucco tract box that is now worth 50% of what it was a year ago, is a prideful fool if they do not walk away from this usury today. Maybe not into another new house, but certainly out of the scam houses that have been being sold in Sacramento for the past four years. Furthermore, there but for the grace of God go I … God and several very greedy homeowners who turned down written offers for $25k below their asking prices in the summer of 2006.

Max said...

Default is default, it is a business decision, and in our society it is not punished as a crime.

Ah, but you misread the article. The crime isn't defaulting, it's lying to her lender on her mortgage application about her intentions. Obviously we don't know if she'll be successful, but it's troubling that a Realtor would encourage such behavior.

The only hope here is that her hew prospective lender does their homework, and denies the loan.

Anonymous said...

Just a question. Where on the mortgage application would it ask about plans to default on an existing mortgage?

Max said...

Just a question. Where on the mortgage application would it ask about plans to default on an existing mortgage?

Ha ha. She has to list your income, expenses, assets and liabilities, as well as if she's had ownership interest in another property. If she says "no", then she just knowingly lied on her mortgage application.

Max said...

Sorry: "her income".

deflationaryjane@yahoo.com said...

Lots of people have friends sign a faux lease agreement for the old property to show that it will be leased out to show they have income enough to carry both. I had a friend ask me if I would do this for him and told him no way.

Honestly, if the banks had a shred of common sense, the minute they saw another home liability on the application, they should charge them 3 or 4 points for the privilage. That would knock them back into the NOO classification where they belong.

deflationaryjane said...

Here is some good news

FBI Diverting Resources to Mortgage Fraud
http://calculatedrisk.blogspot.com/2008/06/fbi-diverting-resources-to-mortgage.html

I hope all the investors and buy and bail folks disclosed everything including their real salaries and obligations on their applications.

DrDoom said...

Agentbubble:

I have been looking forward to your sales report for the month of May to go with Max's inventory report. You going to be able to post May sales details?

Thanks

Anonymous said...

Housing depression to last for 15 years.

It will be a deep long housing depression followed by spike in homocide, theft, etc...

go buy a gun to protect yourself now. Short barrel shotgun 20 guage will suffice. Get'm from walmart.

Take care.

ffolkes said...

"it's just a business decision". let's see... walking away from a business contract is OK if you don't like the terms anymore. I wonder if Ms. Caoili would feel the same way if her clients decided to not pay her commission as "a business decision".

Anonymous said...

Is it possible that the journalist wrote the article with a bit of sensationalism? I do coach families through the foreclosure process and the majority of my business is short sale negotiations. This is a legitimate option for distressed homeowners and I think some have chosen to worry themselves about what other people may or may not be doing.

In The Know said...

Linda Caoili.... Hello! That's not even her real name! She goes by seven different names that I know of and counting! She not only does not disclose the "TRUTH" to the lender she in fact pretends to be the "Homeowner" during phone discussions....