mortgage

The Banking Hypocrisy

Bank owned(foreclosed upon) properties still make up a major portion of listings in Las Vegas and other hard hit areas such as Phoenix, Miami, etc. Some of these bank owned properties may have been on the market for months or even years before being sold. In Las Vegas many were never even lived in. So, from a logical stand point, America’s banks should be eager to get these properties off the market. After all, these properties are accruing more debt for the bank. HOA fees, property taxes and utility bills will continue to pile up and are necessary to be paid in full at closing by the bank.

A client of mine came to me with their own conventional financing in place through let’s say BANK A. My client has perfect credit and 30% to put down. We got a full price offer accepted on a discounted luxury property in Lake Las Vegas now selling for just under $200,000. The HOA fees for this V Lake Las Vegas townhome are approximately $900 per month, which makes them very hard to sell, since so few people are willing to pay more than triple the normal association fees in Las Vegas. Our client was happy to do it, and as luck would have it, BANK A was also the owner of the foreclosed property. What a win/win situation! BANK A would no longer be in possession of a property slowly depreciating  vacantly in the Nevada desert, and would not be accruing $900 per month in unused association fees, since the new owner would take over the fees at closing. Then BANK A decided not to sell to it’s own client. Can’t take the risk because not enough people actually live there. Too many investors, not enough people in primary residence.

So here is the hypocrisy. The bank is willing to sell the property but will not finance it, even with a 30% down payment and guarantee that the buyer is going to live in it. Banks turning down offers is nothing new. Last month the Denver ABC News affiliate ran a story about a veteran Joel Brown getting his offers turned down because he was trying to use his VA loan.  What it really boils down to is blatant misuse of funds. I thought that banks were bailed out in large part to get our economy moving yet it is harder than ever for even the best qualified buyers to borrow from their own banks! Fire sales are going on for investors with cash. Banks would rather wait and sell the property to an investor for cash than finance it. All of the major banks that were caught holding worthless mortgages got more than their fair share of tarp funds to tide them over.

So investors come along, scoop up heavily discounted properties for cash then turn around and resell them for a profit….to the home buyers that couldn’t originally get a loan on them in the first place. There is even a bank that allows these flip properties to be sold before the 60 day minimum resale rule on FHA loans. Let’s call that one Bank W. There are rules regarding this of course, but with over a million distressed properties on the market who has time to make sure anyone is following the rules?

Feel free to comment below if you or one of your clients has run into the same problem. Thanks for stopping by our Las Vegas real estate news blog.

FHA Loans Offering No Money Down Purchase Financing?

by Loan Officer Chris Goulart 

Yes, no money down financing is still alive in these days of tightening lending standards!  The Nehemiah program, in conjunction with an FHA loan can help a potential homebuyer obtain a home loan with no money out of pocket.  FHA guidelines state that you must have 3% of your own money into the deal through down payment and closing cost funds, but FHA also allows you to receive a gift that can be used for both your down payment and closing costs. This gift can come from either a family member or a non-profit organization (such as Nehemiah).

Nehemiah is a program that allows the seller to contribute up to 6% of the purchase price.  This contribution can be applied towards the buyer's down payment and closing costs. They charge a small processing fee for this service. This fee can be paid by the seller, buyer, or even the lender. You can also combine that 6% gift with the seller contributing up to another 6% as seller contribution.

Under this program, the seller agrees to pay Nehemiah the amount of the gift at closing.  Nehemiah brings the funds in as a gift, and that money never has to be repaid by the buyer.  There are no income limitations to this program, a buyer only needs to be approved for the FHA mortgage and be working with a seller willing to participate in the program.

Some other benefits of FHA loans include expanded credit requirements, higher loan to values than conventional loans on the market today (up to 97%), and excellent rates.  Additionally, if a borrower does not qualify for the loan with their income, you can add a non owner occupant borrower to the loan to help with the qualification.  This non owner occupant borrower can be a family member or another person whom the borrower can demonstrate a family type of relationship with.

Some recent changes made have opened FHA programs to many borrowers who may not have been able to access them only 6 months ago.  One of the biggest changes has been an increase in the loan limits.  These loan limits are now set county by county, making FHA loans a viable option in high cost areas (such as California).  Take a look at this article for the new loan limits by county for California.  These limits are only temporary for the time being, but there is legislation in the works right now that may extend or make these limits permanent.

FHA offers some great programs for both home buyers and existing homeowners looking to refinance.  FHA was a program created in the depression era to help bailout the housing issues of the 30's.  Once again FHA is poised to become the government's tool to help stabilize the mortgage and housing industry issues we are experiencing currently.

About the author

Chris Goulart is a direct hard money lender for transactions that fall outside of the conventional lending box. He authors a california mortgage blog full of insights into the loan and real estate industry.

Real estate shenanigans land couple in hot water

eve mazzarellaLast week the FBI started a mortgage fraud task force to deal with the high number of foreclosures in Southern Nevada. The task force is comprised of local and federal authorities, including the IRS, FBI, Metro, HUD and the Nevada AG's office. The same day they announced their first case against the owners of Distinctive Real Estate & Investments, Eve Mazzarrella and her husband Steven Grimm. The company website, lasvegascondomania.com is still up and running, although no one answers the phone and all of the photos of Eve and the company name have been removed. According to authorities, the couple was allegedly involved in a scheme of inflated housing values, straw buyers and limited liability companies. Investigators have seized hundreds of boxes of documents and some computers from two offices and two homes connected to the couple (prosecutors received help from a former employee of the couple, Cathy Rojas).

A release from the US Attorney for Nevada, stated the plan involved 227 properties with a purchase price totaling 100 million dollars. Of those 227 properties, at least 118 of the properties have been sold in foreclosure. The banks that owned the properties lost an estimated 15 million dollars. The quote below came from Eve's bio on the company website.

quote from website

Both individuals have been arrested and charged with six counts of bank fraud and one count of money laundering, plus aiding and abetting. If convicted, they could face up to decades years in prison. The couple is being represented by attorney John Spilotro. The trial date is set for May 19th.

Follow the Money

In an interesting twist, government prosecutors say the couple funneled $8.7 million dollars through a series of different bank accounts but only $5,000 of it has been found. The alleged scheme involved a $100 million in loans.

The Human Cost

The couple (allegedly) conned unsuspecting buyers into using their good credit to perpetuate the scam. The homebuyers are now facing foreclosure, their credit ruined and some have lost everything. One man claims to have lost $125,000 to the couple. Now as taxpayers, we will end up footing the bill eventually.

The Sting

A typical scam to defraud the bank usually involves an over inflated sales price with a large kickback through the title company going to an LLC, unbeknownst to the lender. While prosecutors haven't released the specifics of the fraud involved, it's a pretty safe bet that's what happened. No word yet on more arrests, although with a scam of this size and depth there had to be several others involved like appraisers or home inspectors.

Foreclosure Scammers

This wasn't the first scam uncovered this year. Often criminals target the desperate. In January of this year, Metro investigators arrested Sheila Williams, a local escrow officer after she pocketed over $500,000 from a local valley lender. Earlier in the same month, Matt Marlon was arrested for scamming homeowners facing foreclosure. Marlon would approach homeowners, offer to buy the homes and make the payments. He of course didn't buy the home or make any payments. Instead, Marlon would then rent out the homes to unsuspecting renters. Marlon has "helped" at least 60 home owners in the valley under a variety of aliases. Marlon created approximately 45 corporations to "buy" homes. In a strange twist, Marlon was also CEO of the SEO firm Traffic Power.

If you have had any business dealings with the above individuals, you can contact the Southern Nevada Mortgage Fraud Task Force at (702) 584-5555. There is also a Nevada site to help homeowners facing foreclosure at foreclosurehelp.nv.gov.

Sources: FBI News Release 3/13, KLAS Channel 8 I-Team Reports

Related:

Las Vegas Foreclosures

Bankrupt lenders

Bankrupt lenders trash confidentiality

Think your personal information is safe? So did these people when they applied for a loan.

Another black eye for the mortgage industry

This is a prime example of the additional fallout from the subprime mortgage collaspe. Several lenders here in Las Vegas have gone belly up. By law, these companies are required to properly dispose of any private documents they had in their possession.

What you can do

There are several things you can do to protect your confidential information. Making sure that you shred any personal information at home before throwing it away is a must. You may also want to invest in a safety deposit box for your confidential documents. If you suspect that your information may have been lost or stolen, there are some things you should do. First off, if you suspect that your information may have been compromised pull your credit report and ask the reporting bureaus to notify you of suspicious activity and most importantly, document your actions. Having documentation may be extremely helpful to you later on. The government has established a task force to fight identity theft. You can download a free guide to avoiding identity theft and fighting back on the FTC's website here.

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