Treasury Investigates a Bet Against Home Owners

Daily Real Estate News | Tuesday, January 31, 2012

The Treasury Department is investigating allegations against Freddie Mac that accuse the government-sponsored enterprise of “betting against home owners’ ability to refinance their loans” while also putting in roadblocks to make it more difficult refinance at today’s lower rates, White House spokesman Jay Carney said Monday.

Some argue the GSE imposed several barriers to home owners who wanted to refinance their mortgages, like adding risk-based fees. 

The White House says it has tried to get the GSEs to ease such refinancing restrictions, as well as participate in debt-forgiveness programs, so more home owners can take advantage of current low mortgage rates.

The Treasury Department announced last week that it would extend for the first time to Freddie Mac and Fannie Mae-backed loans incentives for lenders to forgive portions of homeowner debt in a refinancing program. 

But both GSEs have traditionally refused to permit debt reduction on its loans because it says it will create more losses to taxpayers. (The GSEs are backed by taxpayer money.) The GSEs did agree to review the current incentives, however. 

Several media outlets are reporting that Freddie Mac had a multibillion-dollar investment that hinged on borrowers continuing to pay higher interest rates, and they’re alleging that’s why the GSE wasn’t so eager to help more home owners refinance. 

“Beginning in 2010, Freddie bought several billion dollars' worth of ‘inverse floater’ securities — essentially the interest-paying portion of a bundle of mortgages — for its investment portfolio while selling the far less risky principal portion,” an article in The New York Times reports. “There is no evidence that Freddie tailored its refinancing standards to its investing strategy, but ‘inverse floaters’ make less money if the loans they cover refinance to a lower interest rate.”

Freddie denies any wrongdoing and, in a company statement said that it has stopped doing such transactions and only $5 billion of its $650 billion portfolio contained inverse floaters. In a statement issued Monday, the company said ''Freddie Mac is actively supporting efforts for borrowers to realize the benefits of refinancing their mortgages to lower rates.” What’s more, the company says that refinancings made up 78 percent of its loan purchases last year. 

Source: “Treasury Investigates Freddie Mac Investment,” The New York Times (Jan. 31, 2012) and “Is Freddie Mac Betting Against Home Owners?” ABC News (Jan. 30, 2012)

6 Charged in ‘Builder Kickback’ Scam

Daily Real Estate News | Wednesday, January 25, 2012

Six Charlotte, N.C., residents were charged with working with a home builder in a mortgage scheme that involved offering “builder kickbacks” to fake buyers, which prosecutors say resulted in hundreds of fraudulent sales in the area between January 2005 and February 2008.

The defendants, which include real estate agents, an accountant, mortgage brokers, and the builder’s owner, were working with Tara Properties to sell houses, according to court documents filed by prosecutors.

Tara, which typically builds homes in the $100,000 to $200,000 range, would offer kickbacks of 15 percent of the sales price, prosecutors say. But the kickbacks were never disclosed to lenders or disclosed on loan applications, prosecutors allege.

Prosecutors allege that Tara paid more than $5 million in kickbacks, and the straw buyers involved in the scheme were able to bilk more than $42 million in fraudulent loans from lenders.

Straw buyers lied on mortgage applications about income and assets, employment, and their intent to occupy the home as a primary residence, court document say. The majority of the deals ended in foreclosure.

The defendants have declined to make public statements on the charges.

Source: “6 Charged in Charlotte-Area Mortgage Scheme,” The Charlotte Observer (Jan. 24, 2012)

Florida Radio, TV Host Busted for Ponzi Scheme

Daily Real Estate News | Wednesday, January 18, 2012 

A South Florida radio and TV host who shared with listeners how to make it big during South Florida’s real estate boom was sentenced to four years in prison for taking part in a Ponzi scheme that bilked money from his real estate clients. 

Anthony F. Cutaia, 65, hosted “Talk About Mortgages and Real Estate” on South Florida’s local PAX TV network and radio station WSBR (740-AM) and held seminars offering up financial advice on real estate. 

Cutaia was accused by federal prosecutors of extorting about $1.56 million from his Boca Raton, Fla.-based commercial real estate business, CMG Property Investment Group, to pay for his housing expenses, cruises, cars, casino trips, and more. Prosecutors accused him of running a Ponzi scheme since forming his company in 2002. 

Prosecutors say the victims of his scam included a retired U.S. Department of Homeland Security special agent, who lost almost all of his $180,000 investment that he thought was being used to buy commercial real estate. 

Prosecutors say another one of Cutaia’s victims included the Palm Beach Gardens police chief, who invested $150,000 of his retirement money and lost almost all of it after investing in Cutaia’s company.

Cutaia told the judge prior to sentencing that he believed he’d be able to pay back investors, and he blamed the real estate market collapse on his inability to do so. 

Source: “Former Host Gets Four Years in Ponzi Scheme,” South Florida Sun-Sentinel (Jan. 18, 2012)

4 Ways to ID Borrower-Assistance Scammers

Daily Real Estate News | Friday, January 13, 2012 

 

Scammers have targeted delinquent borrowers during the past few years, hoping to take advantage of their desperation and financial inexperience. Their approach typically involves posing as a representative of a nonprofit or government agency who can help with a loan modification or some other form of assistance.

Sheri Stuart, education manager at Springboard Nonprofit Consumer Counseling, says she frequently encounters consumers at courses offered by her organization who have been victimized by these scams. Stuart says she recently met a couple from Southern California at one of these events who’d paid $3,000 to a fraudulent company in an attempt to keep their home out of foreclosure.

“It’s disconcerting,” she says. “It has a ripple effect. It not only affects the home owners, it affects the communities as well.”

To keep more consumers from being taken in by these scams, Stuart offers the following four red flags to help determine whether borrowers’ knight in shining armor is actually a swindler on the make:

1. They ask for money up front. “That’s usually an indication that someone has an ulterior motive,” Stuart says.

2. “Phantom help” appears out of nowhere. If a consumer hasn’t proactively contacted anyone about missed mortgage payments, but suddenly gets calls and mail about getting help for missed mortgage payments, it’s probably a scammer.

3. They present phony credentials. Many companies that claim to offer assistance will have official-looking seals from credentialing institutions on paperwork, promotional materials, and Web sites. Research those organizations to make sure they actually exist.

4. They make promises they can’t deliver. If they make ambitious guarantees about being able to modify loans or halt foreclosures, that should set off alarm bells. “Nobody can promise you a loan mod,” Stuart says.

If your clients suspect they have been or are being targeted, point them to Loanscamalert.orgloanscamalert.org to get more information and report the scammers.

By Brian Summerfield, REALTOR® Magazine

Unemployed to Get More Mortgage Relief

Daily Real Estate News | Monday, January 09, 2012 

 

Unemployed home owners who have mortgages backed by Fannie Mae or Freddie Mac may be eligible for up to a 12-month reprieve from paying their mortgage or paying reduced payments for that time period.

The mortgage giants’ program currently allows six months of relief to the unemployed. Freddie Mac announced that the changes will take effect Feb. 1. However, Freddie officials say extended one-year forbearance period will be temporary, and borrowers will still be responsible for eventually owing the payments they’ve missed. 

Fannie Mae announced it also would be implementing a similar extension to its unemployed aid program.

"These expanded forbearance periods will provide families facing prolonged periods of unemployment with a greater measure of security by giving them more time to find new employment and resolve their delinquencies," says Tracy Mooney, a Freddie Mac senior vice president. "We believe this will put more families back on track to successful long-term home ownership."

Source: “Fannie, Freddie to Give Unemployed Up to 12-Month Break on Mortgages,” Dow Jones Business News (Jan. 6, 2012)