Speaking before the Senate Judiciary Committee last year, FBI Assistant Director Kevin L. Perkins noted that the FBI now has new funding to chase mortgage fraudsters under the Financial Intelligence Center (FIC).

The FIC, says Perkins, allows the FBI “to investigate mortgage fraud, predatory lending, market manipulation, and other financial frauds. The FIC is currently staffed with one supervisory intelligence analyst, eight staff operations specialists, and six intelligence analysts. In FY 2010, the FIC should be fully operational with a total staffing level of 58.”

This is a big jump in personnel and the effort should be welcomed but the problem concerns predatory lending.

What, exactly, is the FBI supposed to investigate? Predatory lending where a borrower is hurt by the actions of a lender is not a federal crime while mortgage fraud — where a lender is hurt — is entirely unlawful.

As an example, Smith qualifies for an FHA loan but is sold a subprime mortgage by his nearby, friendly mortgage lender. The result is that Smith pays, say, 7 percent rather than 5 percent interest and his monthly cost for a $200,000 loan goes from $1,073 for principal and interest to $1,331. That’s an additional $258 a month or $3,096 a year, a loan which is less affordable and far more likely to result in foreclosure. It’s also a loan which is fundamentally unfair given Smith’s credit and financial standing.

Why is it that unfairly taking an additional $3,100 a year from borrower Smith is lawful but robbing $20 from a convenience store is a crime? As Woody Guthrie explained, some people will rob you with a gun and some with a pen. In either case, it’s still robbery.

Under federal rules, mortgage lenders have no obligation to get the best rates and terms for borrower Smith. There is no fiduciary obligation to a borrower, no agency requirement. Unfortunately, Smith has no place to get mortgage information other than, well, mortgage lenders. Smith relies on lenders for information, advice, product options and rates.

It’s great that the FBI has more funding and will be able to field more people in the fight against financial fraud. That’s right and proper. But it’s not fair to the FBI to ask for their help in the fight against predatory lending when predatory lending is perfectly lawful under federal rules.

FBI Expanding Fight Against Mortgage Scams is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: agency, crime, FBI, fiduciary, foreclosure, lending, loan, mortgage, predatory, Woody Guthrie

If that sounds like a loopy idea, consider this: There is currently no rule which says a convicted criminal cannot act as an FHA mortgage lender.

Alternatively, consider this: If someone has been in jail, served their time and completed their obligation, how can they earn a living and become productive members of society if we do not allow them to find work — including work in the mortgage field?

This is not an abstract argument. A bill going through the Congress right now, H.R. 1106: The Helping Families Save Their Homes Act of 2009, would ban large numbers of people from originating FHA loans — including some who have never been convicted of anything.

Let’s take a look at Section 203.

It says that “in order to be eligible for approval by the Secretary, an applicant mortgagee shall not be, and shall not have any officer, partner, director, principal, or employee” of an FHA approved lender who has committed certain crimes — or who has not committed certain crimes.

First, it would bar anyone who has been “under indictment for, or has been convicted of, an offense that reflects adversely upon the applicant’s integrity, competence or fitness to meet the responsibilities of an approved mortgagee.”

There’s a huge difference between an indictment — which is nothing more than an accusation — and a conviction, which means a court has found someone guilty. While not all court decisions are correct, that’s why we have an appeals process and why people on death row are released with some frequency, indictments are not evidence of certain guilt. Indictments are, instead, an accusation, a claim — and very often thrown out.

Thus the proposed law would punish people who literally have done nothing wrong.

The legislation would, if passed, also bar those who are “subject to unresolved findings contained in a Department of Housing and Urban Development or other governmental audit, investigation, or review.” If the findings are unresolved, could it be that they are being appealed in the court process? Are audits, investigations or reviews always right? Should we punish people for pursuing their rights in court? If a matter is “unresolved” and we punish people for merely trying to defend their rights, does that not give the government a lot of authority — perhaps too much authority.

The bill would also dump those “engaged in business practices that do not conform to generally accepted practices of prudent mortgagees or that demonstrate irresponsibility.” I wonder about this: Does this mean the idiots who developed such things as option ARMs, the widespread use of interest-only loans or stated-income loan applications would be barred from making mortgages? If so, that would mean huge numbers of lenders in big banks would today be unemployed — and without bonuses.

What about the regulators who did nothing to stop practices that were not prudent — and had the authority to so? Where is the provision which would toss them out of their cushy government jobs?

The bill says that if someone has been “convicted of, or who has pled guilty or nolo contendre to, a felony related to participation in the real estate or mortgage loan industry” they cannot go back to work selling loans. I’m okay with this one because it is relevant, requires an actual conviction and has a time limit. In America we should not punish people forever, unless we want to feed and house them forever.

It’s easy to yell and scream about law and order, but in this country we believe in the central concept of being innocent until proven guilty — and even then there’s a right to appeal. We also believe that government is not always right — that’s why we try to balance the branches of government. This is why Section 203 of the bill, a bill which otherwise largely deals with the right of bankruptcy judges to modify mortgages, needs to be re-thought and revised.

Should Criminals Make Mortgages? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: 1106, bankruptcy, crime, criminals, Helping Families Save Their Homes Act of 2009, indict, indictments, judges

“While predation is the law of the jungle in nature, as civilized society, we need to have laws in place to protect investors and consumers,” Ryan told the Securities Industry and Financial Markets Association (SIFMA).

“Market integrity is critical for a sound and robust market,” he continued. “Market participants must know the playing field is level and the rules are fair. There is a real benefit to the existence and enforcement of broad anti-fraud and anti-manipulation authorities. Predatory lenders, rumor mongers, market manipulators, insider traders and others who seek to gain an unfair advantage must be identified and prosecuted.”

This is great stuff and you can readily agree with Ryan’s sentiments, but no predatory lender will ever be persecuted by the federal government. The reason? Predatory lending is not a federal crime.

Don’t believe it? Just take a look at the annual statistics for financial crimes. Not a single case of predatory lending.

In our system mortgage fraud — such as deliberately and materially inflating income or assets on a loan application — is a crime. But if a borrower qualifies for an FHA mortgage at 6 percent and is sold a subprime loan at 8 percent, the law says that’s not a crime and that’s not predatory lending. That’s just good business for a lender — though perhaps not so good for the borrower who now has far higher monthly costs and is much more likely to lose his home to foreclosure and bankruptcy and thus lower the value of neighborhood houses.

Our Treasury official says “it is important that regulators have broad authority to investigate and prosecute these actions. These measures instill confidence in market participants that the market is operating in a fair and transparent fashion where rules matter.”

Mr. Ryan is right, of course, but he would be more right if the concepts of fairness and transparency applied not just to borrowers but also to lenders. Until predatory lending is a federal crime with actual consequences there’s little reason for borrowers or investors to have faith in a one-sided system which does not serve them well.

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Published originally by Realty Times on May 7, 2008 and posted with permission.

Here’s A Fact: Predatory Lending Is Not A Crime is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: crime, federal, lending, loan, mortgage, predatory

Alas, the latter notion is now under attack. According to Governing magazine, city planners in Austin, Baltimore, and Olympia hope cul-de-sacs will become an endangered design species.

But wait a minute! Cul-de-sacs are great because they limit traffic, Parents love them because children can ride bikes in front of the house without being mowed down by crazed suburban commuters. And cul-de-sacs allow developers to use land efficiently.

So what’s wrong with cul-de-sacs?

“Too much traffic. Too many delays for fire trucks and other emergency vehicles. Too little sense of community,” reports the magazine.

“While their popularity among homebuyers remains undiminished, cul-de-sacs are under attack,” Governing explains. “Critics blame ‘the lollipop-shaped, dead-end roads” for producing enfeebled ‘cul-de-sac kids,’ bored teenagers who turn toward delinquency, isolated ‘soccer moms’ and stranded senior citizens. More concretely, they point out that cul-de-sac subdivisions are disgorging new streams of traffic onto already overloaded arterial roads, creating massive traffic congestion and forcing local and state governments to spend millions on road construction.”

Wow! Cul-de-sacs do all of this?

Do Cul-De-Sacs Cause Crime?

Just how much do cul-de-sacs contribute to juvenile delinquency? Maybe there is a study somewhere which shows that more broken homes are located on cul-de-sacs or that poverty is more common on cul-de-sacs. I would really like to see a rigorous, peer-reviewed published article proving that cul-de-sacs by their nature encourage juvenile delinquency — or any other form of bad behavior.

Alternatively, is there any evidence that through streets enhance sanity or reduce delinquency? How many drag races occur on cul-de-sacs?

Other Claims

How do cul-de-sacs strand senior citizens? Do they not have access to the road system? Are people prevented from visiting them? Are mail deliveries not made on cul-de-sacs?

And how do cul-de-sacs isolate “soccer moms” or any other type of mother? Do not phone lines reach homes on cul-de-sacs? Are cable companies prevented from entering cu-de-sacs? What about working moms who live on cul-de-sacs — are they isolated also? Are women confined to cul-de-sacs or are they allowed to leave? Do cul-de-sacs also isolate “soccer dads,” or is this a gender thing?

What evidence exists to support the idea that cul-de-sacs reduce the local “sense of community?” Is there a standard measure, such as a mile or a pound, which can be used to define a “sense of community?” And if no such measure exists, then how is it possible to say that a local “sense of community” is better or worse?

Traffic

As to cul-de-sacs forcing all that traffic onto roadways, cul-de-sacs are neither the cause nor the cure of this problem.

Streets are more crowded in some areas because our population keeps growing and people refuse to stay at home. More vehicles are on the streets, not because we have cul-de-sacs but because we have a growing population. You could eliminate every cul-de-sac in America and the number of drivers and vehicles would continue to grow — along with traffic.

The idea that traffic could be drained from main streets by building fewer cul-de-sacs misses an important point: People don’t want such traffic, noise or speeding in their neighborhoods — that’s why they have cul-de-sacs.

Okay, so why keep cul-de-sacs? In the best survey of all, the one where people vote with their dollars, the marketplace answer is clear. Home buyers favor the simple cul-de-sac.

“Just aesthetically, people like them,” Dominic Chavez, government relations liaison at the Real Estate Council in Austin, Texas tells Governing “Those are the first lots that sell in a subdivision,” he explains.

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Published originally by Realty Times on December 4, 2001 and posted with permission.

Should We Put An End To Cul-De-Sacs? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: crime, cul, de, growth, sac, smart, traffic, zoning

It’s easy to understand that the value of a home will be reduced if the roof leaks or the basement floods, but matters become more complex when the issue is psychological rather than physical.

Suppose a home is in flawless physical condition, but suppose as well that it’s also been the site of a murder or a suicide. Everything works, nothing leaks or floods, but is the home as valuable as a similar property where such events have not occurred?

Some prospective buyers would plainly be discomforted by such news with the result that either they would not bid on the property or they would reduce their offers.

While the feelings of many buyers are entirely understandable, it’s also easy to see that sellers may be unfairly hurt in this process.

Suppose a home is the site of a suicide or murder. If the individual who died was a friend or relative of the owners, they no doubt feel enormous loss and perhaps wish to move. But under some state rules, when they offer their home for sale the owners must tell buyers of recent events at the home, thereby lowering its value.

The catch is that a number of states have so-called “stigmatized housing” rules which say that owners and their brokers need not disclose the events at the home related to suicides, accidental deaths, natural deaths, ghosts, or felonies. These rules are inconsistent, however, so that the disclosure requirements in one state may be vastly different than another. And many states have no rules dealing with stigmatized homes, a legal gap which offers no guidance to buyers, sellers, or brokers.

The result is that what must be said depends on where you live. A murder, for example, may have to be disclosed in one state, not disclosed in another, or disclosed today but not after several years.

Moreover, HUD has taken the position that owners and their brokers can say nothing if an owner has AIDS or has died from AIDS. The logic is that those with AIDS have a disability and are therefore a protected class under federal anti-discrimination rules.

In looking at the various guidelines which impact stigmatized homes, it’s little wonder that state rules are often divided on this issue. Stigmas relate to personal values, preferences, and perceptions, matters difficult to legislate.

If you own a property which is or may be sitgmatized, or if you are considering the purchase of such a property, be certain to first speak with knowledgeable brokers and attorneys in your state to see what disclosures, if any, are required.

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Published originally by Realty Times on May 25th 1999 and posted with permission.

Stigmatized Housing — Will Ghosts Get Your Equity? is a post from: OurBroker.com -- Refinance, Home Mortgage Loans & Rates, Home Equity Loan

Technorati Tags: crime, ghost, home, murder, sale, stigmatized, suicide