Category Archives: Mortgage Fraud

Aren't You Ashamed?

How do owners react when REOs devastate the comps? How about listing their houses at WTF asking prices and hoping for the best. They really should be ashamed of themselves.

Today’s property is one of two recent listings on the same street as last week’s distressed property. The only difference is a doubling of the asking price. WTF?

35 Crimson Rose inside

Asking Price: $2,195,000

Address: 35 Crimson Rose, Irvine, CA 92603

We are scheduled to have an IHB Block Party on Monday, March 9, 2009, at J.T. Schmids at the District. Come out and meet with everyone from the IHB.

Shame — Evelyn King

It’s a shame
Ooh, I wouldn’t want to live with the pain
Gonna stay forever
Oh, it’s a shame
Shame

Sellers in Turtle Ridge obviously have no shame. They should. Some of their asking prices are embarrasing. We are in the depths of a global economic recession rivaling the Great Depression, asset prices of all kind are dropping, the stock market is trading at 1996 levels, unemployment is rising, and yet, despite all these problems, houses in Turtle Ridge have continued to appreciate. WTF

WTF?

Last week I profiled 46 Crimson Rose, Irvine, CA 92603 asking $1,215,000. This is a house on the same street as the two we have today. The house at 46 Crimson Rose can’t sell at $1.2 million, so surely asking over $2,000,000 isn’t going to work. Well, the neighbors think asking $2M+ will work just fine. The vacant property at 48 Crimson Rose, Irvine, CA 92603 is asking $2,295,000. Are you kidding?

Perhaps these listings were on the market for a while and the distressed listing just came on the market and is making them look bad. Nope. The distressed property has been on the market over 60 days, and these two new listings just came on the market this week. Both of these homeowners, both of whom are supporting empty houses, just listed these properties for a million dollars more than their neighbor.WTF

WTF?

I cannot even imagine the thought process these people must have gone through. The both must know their neighbor has been for sale for over 60 days at $1.2 million. Perhaps they just pretend the short sale isn’t there. They must reason it isn’t part of the “real” market. And surely their houses are much superior to that other one. I can’t get my mind around it. For that reason, it is a WTF award winner.

35 Crimson Rose inside

Asking Price: $2,195,000IrvineRenter

Income Requirement: $548,750

Downpayment Needed: $439,000

Monthly Equity Burn: $18,291

Purchase Price: unknown, approximately $1,950,000

Purchase Date: 3/17/2006

Address: 35 Crimson Rose, Irvine, CA 92603

Beds: 5
Baths: 6
Sq. Ft.: 3,100
$/Sq. Ft.: $708
Lot Size: 5,891

Sq. Ft.
Property Type: Single Family Residence
Style: Tuscan
Year Built: 2005
Stories: 2
View: Catalina Island, City Lights, City, Coastline, Harbor, Mountain, Ocean, Panoramic, Has View
Area: Turtle Ridge
County: Orange
MLS#: U9001013
Source: SoCalMLS
Status: Active
On Redfin: 2 days

1 OF A KIND! Former Model w/approx $500K in ‘Top of the Line’ designer
& builder upgrades. Located in prestigious Summit @ Turtle Ridge,
this property boasts phenomenal panoramic views from ocean, coastline
& city lights to mountains. Abundance of decorator features
including wood, travertine & stone floors throughout, beamed
ceilings,wrought iron accented front entry doors, gates & stair
rail, decorative chandeliers, casita with full size wine refrigerator
& storage area, closet organizers + lots of built-ins &
bathroom upgrades. Flexible floorplan has 3 bedrooms on main
level,(including casita) each with own bath,designer gourmet kitchen
with 2nd laundry area. Upstairs includes Master Suite with picturesque
views from bedroom & bath area, 5th Bedroom with own bath,+
convenient spacious laundry room. Summit @ Turtle Ridge is a
guard-gated community with world class amenities including community
parks, playgrounds, resort-like pools, fitness center and walking
trails.

Oh, the upgrades must make it worth so much. I get it now… not.

Located in prestigious Summit @ Turtle Ridge. I think he means the pretentious Summit at Turtle Ridge.

This property has all the signs of a pure speculative flip. The owner set up a corporation to buy the property. There is a $1,575,000 first mortgage, and the rest was a downpayment. The corporation would get to write off the interest over $1,000,000 whereas an individual cannot. Plus, there may be some additional liability and credit protections if the owner did not have to personally guarantee the loan. In any case, the property does not appear to be lived in, so this flipper has been bleeding cash since he bought it in early 2006. Perhaps he lived in it for a while and has since moved. I don’t know.

If this property sells for its asking price, the owner will make money on his flip. Of course, for that to happen, someone with more money than brains is going to have to put down a lot of cash to buy this place, and this property will have to have appreciated in value while every other property in the United States has not. WTF

This seller isn’t the really greedy one. The owner of 48 Crimson Rose, Irvine, CA 92603 is asking $2,295,000. He thinks he is going to make $500,000.

WTF are these people thinking?

{book7}

Shame
Burning, you keep my whole body yearning
You got me so confused
It’s a shame
Sometimes I think I’m going insane
But still I want to stay

Wrapped in your arms
Is where I want to be
I want to be, want to be
Wrapped in your arms
That’s my high, my high
Only love can be to blame
If we lose our love
It’s a shame
Ooh, I wouldn’t want to live with the pain
Gonna stay forever
Oh, it’s a shame
Shame

Shame — Evelyn King

Irvine's Median Property

People have different ideas on what a median property looks like in Irvine. Based on its sales history, today’s featured property certainly qualifies.

Asking Price: $580,000

Address: 26 Bunker Hill, Irvine, CA 92620

Neighbor — Gnarls Barkley

Now my neighbor likes where I stay
But doesn’t, know, the price that I pay

Contrary to popular belief among the bulls, a median income household is supposed to be able to afford a median priced house. I have written at length about Affordability in the post of the same name. When prices are very high relative to incomes, affordability is very low. Usually this is associated with people using affordability products (toxic financing).

Very low affordability creates bizarre alternatives for those who do not wish to play the toxic financing game. For instance, today’s featured property is an old, smallish 3/2 in an average neighborhood. It sold for $740,000 in 2005. At that price, this property is only affordable to a household making $185,000 putting $148,000 down. Look at the house. Does it look like the property you would expect someone who is making that kind of money to live in? A household making $185,000 a year is in the top 20% of wage earners. Since rents are directly tied to incomes, these wage earners could still rent a property in the top 20% of Irvine’s properties. Therefore, the alternative facing those looking for housing at the peak was to chose between renting the property the is commensurate with their income, or buying a property that was several rungs down the property ladder.

With the conditions of the bubble rally–greed for rapid appreciation, fear of being priced out, the belief that prices cannot fall, no-limit financing alternatives, and an unbridled sense of entitlement–it is not surprising that few people stayed within conservative financing guidelines. When you think about it, the bigger surprise is that anyone did behave conservatively.

{book2}

Today’s featured property is a great example of a median property in Irvine. Half of Irvine’s properties are nicer, and half are not as nice. The strongest evidence for this comes from the sales history. I used the DataQuick numbers for Irvine (current value is a guess), and as you can see, the difference between the actual sales price of this property and the Irvine Median is very small over a large number of transactions.

Sales History

Date Event Price
Median Difference
13-Feb-09 Listed $580,000 $580,000 $0
15-Jul-05 Sold $740,000 $643,000 $97,000
4-Apr-05 Sold $660,000 $625,000 $35,000
3-May-04 Sold $615,000 $620,000 ($5,000)
14-Mar-03 Sold $435,000 $421,000 $14,000
9-Mar-01 Sold $339,000 $321,000 $18,000

Continuing the theme of matching the median, I believe this property will fall down to the the low $400s somewhere below the 2003 purchase price, perhaps lower if there is overshoot.

The last sale, the one to the current owner looks fishy to me. The flipper before them did not get a bargain. There was no huge discount based on comparable pricing. Despite this fact, this flipper was able to find someone willing to pay $80,000 more for this property 3 months later. This purchase prices is clearly too high. Why would someone do this? Ignorance is one answer (or defense), but in a fraud scheme, the buyer would be in on the deal, and they would be getting a piece of the $80,000 profit.

Does it look suspicious? Yes, it does. Was this fraud? Probably not in this case as it was not 100% financing. Unfortunately, that leaves buyer ignorance…

Asking Price: $580,000

IrvineRenter

Income Requirement: $145,000

Downpayment Needed: $116,000

Monthly Equity Burn: $4,833

Purchase Price: $740,000

Purchase Date: 7/5/2005

Address: 26 Bunker Hill, Irvine, CA 92620

Beds: 3
Baths: 2
Sq. Ft.: 1,647
$/Sq. Ft.: $352
Lot Size: –
Property Type: Single Family Residence
Style: Other
Year Built: 1977
Stories: 1
Area: Northwood
County: Orange
MLS#: S563623
Source: SoCalMLS
Status: Active
On Redfin: 3 days

Beautiful single level house in Northwood with a very spacious
floorplan. Home is complete with granite countertops in kitchen and
bathroom. Home is in quiet neighborhood close to schools, shops, and
parks.

This house was purchased on 7/5/2005 for $740,000. The owners used a $592,000 Option ARM and a $148,000 downpayment. On 5/19/2006 they opened a HELOC for $134,000 taking out most of their equity (or at least gaining access to it). Assuming they took out their downpayment, the total debt on the property is $726,000 plus three and one-half years of accumulated negative amortization. Does anyone want to bet that this owner hit their 110% cap causing a mandatory recast? If so, the property debt is closer to $775,000.

In any event, a $580,000 asking price is going to be a short sale, and the lender is going to lose money. I don’t know how much, but it could easily be $250,000 or more.

This is one of many Option ARM implosions we are going to see. There is no hope for these people because their payment after the recast is going to be astronomical. If they could afford it, they probably would not have taken out the option ARM to begin with. However, even if we give them the benefit of the doubt and assume they could afford the payment, why would they bother. Who is going to pay 2 or 3 times the going rental rate for a property that is $250,000 underwater? Nobody is.

{book1}

Now my neighbor likes where I stay
But doesn’t, know, the price that I pay
My neighbor!! My neighbor!!
Myyyyy neighbor… wants what he sees
My neighbor!! My neighbor!!
Myyyyy neighbor… thinks he wants to be me
But he’ll never be

From out my window, seems just fine
But in his mind, again his world is far from kind
So I invited him over, could this make a new friend
But once I got to know ya, wish I never let you in

Now my neighbor likes my clothes
But hadn’t seen me with my scars exposed
My neighbor!! My neighbor!!
Myyyyy neighbor, ohhh dissatisfied
My neighbor!!
My neighbor’s, behavior… is unjustified
I’m sick and tired

I don’t know, if he lives all alone
But if you’re scared of the darkness best leave the lights on
I had a talk with my neighbor
Say it simple and plain
I guess, he understood me
He never came back again

Now my neighbor, likes my car
But no matter where you go, there you are…

Neighbor — Gnarls Barkley

Houses and Commodities Trading

Houses and Commodities Trading

Commodities are items of value and uniform quality produced in large quantities and sold in an open market. Although every residential real estate property is unique, these properties became uniformly desired by investors because all real estate prices rose during the Great Housing Bubble. The commoditization of real estate and the active, open-market trading it inspires caused houses to lose their identity as places to live and call home. Houses became tradable stucco boxes similar to baseball playing cards where buying and selling had nothing to do with possession and use and everything to do with making money in the transaction.

In a commodities or securities market, rallies unsupported by valuation measures will fall back to fundamental values. It is very clear the rally in house prices was not caused by a rally in the fundamental valuation measures of rent or income. Many people forgot the primary purpose of a house is to provide shelter — something which can be obtained without ownership by renting. Ownership ceased to be about providing shelter and instead became a way to access one of the world’s largest and most highly leveraged commodity markets: residential real estate.

Commodities markets are notoriously volatile. In fact, this volatility is the primary draw of commodities trading. If market prices did not move significantly, traders would not be interested in the market, and liquidity would not be present. Without this liquidity, hedgers could not sell futures contracts and transfer their risk to other parties, and the whole market would cease to function. Commodities markets exist to transfer risk from a party that does not want it to a party who is willing to assume this risk for the potential to profit from it. The commodities exchange controls the volatility of the market through the regulation of leverage. It is the exchange that sets the amount of a particular commodity that is controlled by a futures contract. They can raise or lower the amount of leverage to create a degree of volatility attractive to traders. If they create too much leverage, trader’s accounts can be wiped out by small market price movements. If they create too little leverage, traders lose interest.

The same principles of leverage that govern commodities markets also work to influence the behavior of speculators in residential real estate markets. If leverage is very low (large downpayments or low CLTV limits,) then speculators have to use large amounts of their own money to capture what become relatively small price movements. If leverage is very high (small downpayments or high CLTV limits,) then speculators do not have to put up much money to capture what become relatively large price movements. The more leverage (debt) that can be applied to residential real estate, the greater the degree of speculative activity that market will see. Also, the smaller the amount of money required to speculate in a given market, the more people will be able to do so because more people will have the funds necessary to participate. When lenders began to offer 100% financing, it was an open invitation to rampant speculation. This makes the return on investment infinite because no investment is required by the speculator, and it eliminates all barriers to entry to the speculative market. In a regulated commodities market, the trader is responsible for all losses in their account. In a mortgage market dominated by non-recourse purchase money mortgages, lenders end up assuming liability for losses in the speculative residential real estate market. This is a fantastic deal for speculators; for the lenders… not so much.

.

.

Today’s featured property is a classic example of speculation in the residential real estate market. When this seller was a buyer, they utilized 100% financing right at the peak of the bubble. Now that resale values have gone south, the speculator is letting the property go into foreclosure, and the lender is going to be left holding the bag.

63 Copper Leaf Kitchen

Asking Price: $575,000IrvineRenter

Income Requirement: $143,750

Downpayment Needed: $115,000

Monthly Equity Burn: $4,791

Purchase Price: $733,000

Purchase Date: 10/5/2006

Address: 63 Copper Leaf, Irvine, CA 92602

Beds: 3
Baths: 3
Sq. Ft.: 1,656
$/Sq. Ft.: $347
Lot Size: –
Type: Single Family Residence
Style: Other
Year Built: 1999
Stories: Two Levels
Area: West Irvine
County: Orange
MLS#: P624528
Status: Active
On Redfin: 11 days

Terrific Location in Irvine–conveniently close to parks, schools, shopping, dining and entertainment. Beautiful landscape/hardscape done by professionals in the backyard. Hardwood floors throughout first floor.

.

.

If the lender gets the asking price on this one, they stand to lose $192,500 after a 6% commission. This also assumes the borower is current on the mortgage and there is not a large amount of deferred payments adding to the balance due. All part of the price these lenders paid for enabling people to trade houses as commodities and assuming the risk of loss.

.

.

Nine Inch NailsGod money Ill do anything for you.

God money just tell me what you want me to.

God money nail me up against the wall.

God money dont want everything he wants it all.

Head like a hole.

Black as your soul.

Id rather die than give you control.

Head like a hole.

Black as your soul.

Id rather die than give you control.

Bow down before the one you serve.

Youre going to get what you deserve.

Bow down before the one you serve.

Youre going to get what you deserve.

God moneys not looking for the cure.

God moneys not concerned with the sick among the pure.

God money lets go dancing on the backs of the bruised.

God moneys not one to choose

No you cant take it

No you cant take it

No you cant take that away from me

Head Like a Hole — Nine Inch Nails

.

.

Deodar of Destruction

Asking Price: $380,000

IrvineRenterPurchase Price: $515,000

Purchase Date: 10/12/2006

Address: 23 Deodar, Irvine, CA 92604

Beds: 2

Baths: 2

Sq. Ft.: 1,000

Lot Sq. Ft.: 2,800

Year Built: 1976

Knife Catcher Award

Stories: 1

Type: Condominium

County: Orange

Neighborhood: El Camino Real

$/Sq. Ft.: $380

MLS#: S485757

Status: Active on market

On Redfin: 40 days

From Redfin, “Single story home in a corner lot overlooking a huge greenbelt. Beautifully remodeled throughout. This is an as is short sale.”

.

.

This short sale price will probably not be approved by the lender as it is too far outside of their loss limitation guidelines. It is probably priced this low to entice bids in order to give the bank an idea of where the market will be after they take the property back in foreclosure. The bank will lose money, but they will follow their guidelines for loss mitigation which will not permit a 30% haircut after a little over 7 months.

In my opinion the real story here is probably in the sale history:

Sales History

Date Price

10/12/2006 $515,000

10/27/2005 $465,000

08/01/2000 $218,000

It appears to me the buyer on 10/12/2006 was a straw buyer bailing out the 10/27/2005 buyer. The $515,000 sales price, after a 6% commission, would net this seller $20,000 — enough for a payment to a straw buyer and/or the person who arranged the sale. This is pure speculation on my part, and the previous seller may simply have gotten lucky, but when you see a short sale after 7 months, it is probably a first-payment default fraud. This may be a flip gone flop, or it may be fraud, either way this never should have transacted at a price over $500,000, and its next transaction (after the bank buys it at a foreclosure auction) will likely be less than the 2005 price.

The sellers who will really be displeased by this whole mess are the neighbors. The above sale won’t feed their fantasy price, but then again, they probably will ignore its significance as an aberration, drink some kool aid, and deepen their denial.

.

13 DEODAR

Irvine, CA 92604

Price: $565,000

Beds: 3

Baths: 2

Sq. Ft.: 1,178

Lot Sq. Ft.: 3,035

Year Built: 1976

Stories: 1

Type: Condominium

County: Orange

Neighborhood: El Camino Real

$/Sq. Ft.: $480

MLS#: P579755

Status: Active on market

On Redfin: 7 days

.

19 DEODAR

Irvine, CA 92604

Price: $585,000

Beds: 3

Baths: 1.5

Sq. Ft.: 1,517

Lot Sq. Ft.: 2,112

Year Built: 1976

Stories: 2

Type: Condominium

County: Orange

Neighborhood: Orangetree

$/Sq. Ft.: $386

MLS#: P572471

Status: Active on market

On Redfin: 49 days

The Plot Thickens in Fraud Park

Back in October, we did a post on a property in North Park and discovered some fraud going on. Even Casey Serin stopped by and posted a comment. Recently, I’ve gotten some excellent leads on even more fraud going on in Irvine and beyond. I’d like to thank graphrix, brealiving, and IrvineMom for all their help in uncovering this. This thread in our forums was extremely helpful.

Figuring out how all the fraud is connected is a lot of work. Writing a post to explain it is even more difficult. So please accept my apologies if this is hard to follow. Also, because I’m convinced there is something shady going on here, I’m not going to go through the extra work of jumbling names, etc. It’s all public information anyways.

OCRenter at Bubble Tracking and his readers have made some inroads as far as getting the Main Stream Media to notice what’s being said on the blogs (regarding flippers, fraud, etc.). Hopefully, we can get some exposure to this story as well. 🙂

So let’s begin!

*** GROUP 1 – CHAPA, HUSSAIN, YEASMIN, MOZUMDER ***
It appears this group of people purchased 7 homes in North Park in late 2005 and early 2006. Here are the details:

71 Avondale (MLS I703478) – Listed at $725,000 – Short sale
– Purchased by Nurer Chapa and Moktadul Hussain on 12/28/2005 for $735,000

43 Modesto (MLS I703441) – Listed at $750,000 – Short sale
– Purchased by Nurer Chapa and Moktadul Hussain on 12/29/2005 for $750,000

86 Sorenson (MLS I703639) – Listed at $630,000 – Short sale
– Purchased by Nurer Chapa and Moktadul Hussain on 12/22/2005 for $735,000

78 Sorenson (MLS I703654) – Listed at $630,000 – Short sale
– Purchased by Marina Yeasmin and Helal U Mozumder on 10/13/2005 for $715,000


5 Winterfield (MLS I703388) – Listed at $709,000 – Short sale
– Purchased by Marina Yeasmin and Helal U Mozumder on 11/22/2005 for $726,000

1 Thorn (MLS I703426) – Listed at $875,000
– Purchased by Marina Yeasmin, Helal U Mozumder, Moktadul Hussain, and Nurer Chapa on 10/27/2005 for $840,000

63 Modesto
– Purchased by Nurer Chapa and Moktadul Hussain on 3/15/2006 for $715,000
– Transferred to Crossroads Enterprises Inc on 11/28/2006

You can see how the property at 1 Thorn ties all 4 of these people together (it looks like they are 2 couples). Also, ALL 7 of these properties were purchased on 100% financing. The 6 properies that are on the market are listed by Darlene Gallegos of Century 21 Beachside (just click on the links and you’ll see this). Of the 6 that are listed, 5 of them say they are short sales in the private remarks.

{adsense}

*** GROUP 2 – SCHUMACHER, YEASMIN, HOQUE ***
Here we have 4 more homes in North Park that are linked together:

3 Del Mar #10 (MLS I703772) – Listed at $870,000
– Purchased by Sabina Yeasmin on 4/27/2005 for $750,000
– Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005


81 Sorenson (MLS I703686) – Listed at $725,000 – Short sale
– Purchased by Sabina Yeasmin on 5/26/2005 for $700,000
– Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005

47 Middlebury
– Purchased by Mansurul Hoque on 4/28/2005 for $745,000
– Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005

12 Apple Valley
– Puchased by Mansurul Hoque on 10/16/2006 for $869,000

So how is Group 1 linked to Group 2? There are a few connections although I’ll be the first to admit they are kind of loose. First, the Sabina Yeasmin in Group 2 could be related to the Marina Yeasmin in Group 1. Second, 81 Sorenson in Group 2 is practically next door to 78 Sorenson and 86 Sorenson in Group 1. Third, the agent listing the properties in Group 2 is also listing the properties in Group 1. What do you think?

David Schumacher is the common element here in Group 2. Anyone know what a revocable intervivos trust or a Warranty Grant Deed is? All 4 of these homes were purchased using 100% financing. Also, I don’t have any info on Hoque’s properties. Does anyone know if there is a NOD on them? If not, they could be legitimate.

{adsense}

*** GROUP 3 – HOSSAIN, CHOWDHURY, UDDIN ***

11 Solstice – On Foreclosure.com
– Purchased by Shapna and Khoka Hossain on 7/31/2006 for $950,000
– Transferred to First Capital Investments Inc on 11/28/2006

1 Armory – On Foreclosure.com
– Purchased by Manik Chowdhury on 5/9/2006 for $735,000
– Transferred to First Capital Investments Inc on 11/28/2006

68 Arcata – On Foreclosure.com
– Purchased by Manik Chowdhury on 5/9/2006 for $720,000
– Transferred to First Capital Investments Inc on 11/28/2006

39 Modesto – On Foreclosure.com
– Purchased by Giash Uddin on 7/31/2006 for $720,000
– Transferred to First Capital Investments Inc on 11/28/2006

Here, the common link is First Capital Investments Inc. All 4 of these properties are listed on Foreclosure.com. They were all transferred to First Capital Investments on 11/28/2006. They were all initially purchased with 100% financing. Some of you may have noticed that the last propety, 39 Modesto, is the one that started the original fraud post back in October (yup, Shagi Indud = Giash Uddin). Apparently, all of Giash’s properties were transferred to First Capital Investments as well. Thanks to someone who may want to remain anonymous, I’ve come to find that there are 16 properties (7 from Giash, 3 from Group 3, and 6 others) that are owned by First Capital! And almost all of them are NOD!

Ok, we’ve got 11 homes in Groups 1 and 2 that could be connected. And we’ve got possibly 16 homes in Group 3. But is there a link between Group 3 and Group 1? Well, after a little bit of digging, I found out that the address for First Capital Investments AND Crossroads Enterprises is the SAME on the property records! Crossroads Enterprise is the entity that is on the title of 63 Modesto in Group 1. The address for both of these companies is: 25202 CRENSHAW BLVD STE 301, TORRANCE CA 90505.

That’s possibly 27 properties that may be intertwined in some sort of fraud!

Now what? Time to dig up what we can on these corporations. I’ve got some leads from a source who may want to remain anonymous. Apparently, First Capital Investments may be incorporated in Nevada. If anyone has information on these companies, please email me (zovall at gmail dot com) or post a comment. I’ll try to do a follow up post but it may take a while.