DragonSlayer

Housing: No Bottom Yet in Sight

The rescue of Fannie and Freddie will allow scams like the following to continue, because banks can continue to pass off questionable loans to the taxpayer now. The raising of the mortgage limit to 729K has made this possible. This scam took place early this year, regardless of the hysteria about "sub-prime". Please check the following link:

www.ocregister.com/bus...

The scam works like this:
1. Find someone with good credit and not much knowledge of English or with poor reading comprehension. Tell them they will be able to buy a house and make 50K in cash.
2. Buy the house at auction for 300K after foreclosure, probably close to fair value at this price.
3. Mark up the house to 600K, and loan the buyer 125K to satisfy the 20% down requirement. Cut an appraiser and a loan agent in on the deal.
4. Wells Fargo approves the 500K mortgage since the buyer paid 20% down, and he/she has good credit, and they do not want to seem anti-minority or get sued!
5. The "buyer" pays the scammer 500K - 50K = 450K.
6. The scammer makes a cool 150K profit.
7. Wells Fargo does not care since they are going to bundle up the loan and sell it to Fannie Mae or Freddie Mac, ince their conforming mortgage loan limits went up to 729K for jumbo mortgages.
8. "buyer" goes out and buys a nice 50 inch LCD TV and sends some money home to Guatemala.
9. The "buyer" suffers a job loss/divorce/deportati... problem and the house goes into foreclosure
10. The foreclosed house now ends up on Fannie Mae's balance sheet, and is sold for 325K at auction, and the remaining 275K is added to the US taxpayer account.

Chinese and Vietnamese language newspapers are full of these ads where a "buyer" is solicited and a cash offer is made. Now if Fannie and Freddie Mac were private entities, they would not ask for an independent appraisal and reject the loan. Still wonder why you pay taxes?