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Steve Hawks Las Vegas Real Estate Mortgage Fraud / Loan Fraud #1

Steve Hawks Las Vegas Realtor and consumer advocate talks with Kendal Trotter about how mortgage fraud has hurt the Las Vegas market and set in motion the first wave of foreclosures. Hawks also states that when the fraudulently purchased home goes into foreclosure and the bank takes it back the innocent neighbor and homeowner across the street is severally hurt because now their property value will begin to drop also.

For Example
Home listed at 500,000. The buyer paid 815,000 and received 315,000 cash back. Makes one to three payments then lets it go into foreclosure.

The cash going to the buyer or related third party is hidden from the lender or institutional investor by having a check made payable to a third party llc or company from the seller proceeds.

The mortgage broker sells the loan to an institutional investor like Credit Suisse, Aurora Citigroup and others on the secondary market. Wall Street is buying a loan they believe to be 80% loan to value on the first and 20% on the second Reality the home was not even worth $500,000. When the home gets foreclosed on the bank thinks they have a loan on an asset worth 815k and an 80% cushion so if they sell it at 20% less they will still break even. They actually loaned at a 140% loan to value because of the fraudulent price puffing.Instead of recouping their $640,000 of the $815,000 they have to sell the home at the real market value which in this case happened to be 375,000! The first lien holder lost 265k plus expenses and the second lost their entire 80,000 for a total bank loss of 345,000 plus expenses!!!!

BOTTOM LINE
The institutional investor believes they are lending on an 815k asset .they had no idea that there was a 315k cash kick back. They would never do loan like that. This is why the cash back has to be hidden or disguise as something else.

Results
It makes rates higher because now lenders have to figure in a new risk a fraud risk. It has caused 90% of the loans that used to be available to vanish because the losses from the fraud have dried up existing pools of money and nobody with any sense is going to offer the former loans until the cash back fraud is eliminated.

The Legit Buyer
The legit buyer gets hit the most. When they buy a house the legit buyer looks at e comps they see that a comp sold for 815,000. The legit buyer thinks they are getting a great deal for 700,000 they have no idea that the 815,000 comp was sold with 300,000 cash back. Fast foreword one year the 815,000 home is foreclosed on and sold for 375,000 the real market value. The legit buyer is now upside down $325,000.

This is why the cash back mortgage fraud is so devastating to the Las Vegas real estate market . Its ripple effect hurts each process of the sale of a home from the lending to the accuracy of the value of the comparables. Now many people with good credit who need to refinance their adjustable rate mortgage will not be able to because of the lack of equity.

 

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