Were the Banks Complicit in the Mortgage Fraud?

Shares of Washington Mutual tumbled a little over 17 percent today as a result of a probe initiated by New York Attorney General Andrew Cuomo. Subpoenas were issued today by Cuomo to Fannie Mae and Freddie Mac, two large government-sponsored mortgage investors, to investigate mortgages that they purchased from Washington Mutual. Cuomo alleged that Washington Mutual pressured a major real estate company to inflate home appraisals. The New York Attorney General stated, “Our expanding investigation into the mortgage industry has uncovered that Washington Mutual improperly pressured appraisers to provide inflated values that best served the lender’s interest. Fannie Mae and Freddie Mac cannot afford to continue buying Washington Mutual mortgages unless they are sure these loans are based on reliable and independent appraisals.”

This puts a whole new spin on the mortgage fraud fiasco. Everyone has been saying for months that banks were unaware that they were being defrauded. The wool was pulled over their heads, so to speak. This may not have been the case after all. In fact, they may have been pulling the wool over someone else’s head and running them into a wall. Ouch!

If these allegations turn out to be true then Washington Mutual will be in a world of pain. Fannie Mae and Freddie Mac will no longer buy their mortgage loans which will leave Washington Mutual with no other choice but to leave these loans on their books. Not a good scenario.

The Club at Brickell Bay Association Not Paying Its Bills?

Primecast is a cable TV and Internet service company that provides these services to all residents of The Club at Brickell Bay as a part of their association fees. The following letter was delivered last week to all residents living at The Club at Brickell Bay:

IMPORTANT – PLEASE READ

October 31, 2007

Dear Unit Owner,

We appreciate your patronage and want to extend our thanks for being a customer. As you may know, Primecast and The Club at Brickell Bay Master Association have an agreement in which Primecast is to deliver video and Internet service at a discounted price to all members of the Association. Unfortunately, the Association has not performed according to the terms of that agreement, including payment for these services, despite repeated notices from Primecast. As a result, the basic video and Internet services currently being provided to all units under the agreement with the Association will be suspended, effective Tuesday, November 6, 2007.

We apologize for any inconvenience. Please contact your Property Manager with any questions regarding this suspension or call 1-866-xxx-xxxx begin_of_the_skype_highlighting              1-866-xxx-xxxx      end_of_the_skype_highlighting to speak with a Primecast customer support staff member.

Sincerely,

Primecast Collections Department

Three words came to mind after I read the letter: “That would suck!”. This not only affects condo owners but also tenants who signed leases under the pretense that they would receive basic cable TV and high-speed Internet services as a part of their monthly rent. You can be certain that rental prices on future leases will readjust themselves downwards within the next couple of months.

It is no secret that The Club at Brickell Bay has a very high number of condos that have gone into foreclosure and are now bank-owned. There are also a significant number of condos that are in preforeclosure that will probably share a similar fate in the months to come. The Association is likely having difficulty meeting its monthly expenditures as a result of the lost revenue from these foreclosed units. How severe is the problem? Is a special assessment or an increase in monthly maintenance fees right around the corner at The Club at Brickell Bay?

Plaza on Brickell – 1 Bedroom/1 Bath – $282,000

The above picture of the progress at Plaza on Brickell was taken this afternoon. The weather was just perfect today, as it has been for the past four days. 80 degrees, no humidity and clear skies! What more can you ask for in November?

Plaza on Brickell is scheduled to begin closings in January of 2008. I’m a fan of this development for two reasons: price and location. Well, actually three. I also like the commercial aspect of the development on the ground floor along Brickell Avenue. I’ve been told that these spaces have already been accounted for and that a few fantastic restaurants and cafes will open there. It will nicely compliment the shops and restaurants at Mary Brickell Village which are only a few short blocks away. City living is finally beginning to transform Miami.

Someone contacted me a few weeks ago who has a 1 bedroom/1 bath condo under contract at Plaza on Brickell. He went to contract on the unit the first day that sales began. The condo has 838 square feet of interior space and a 130 square foot balcony. The unit is located on the northwest corner of the 851 tower, which is the taller of the two towers, and is situated above the 20th floor. The floor plan of the available condo is below:

The contract holder of this condo at Plaza on Brickell is looking to sell it for $282,000, or $337 per square foot. Units at Plaza on Brickell come move-in ready. Contact me with any questions or if you have an interest in acquiring this condo.

Miami-Dade County Implements Mortgage Fraud Task Force

Miami-Dade County implemented a Mortgage Fraud Task Force division to combat the high number of mortgage fraud cases in Miami-Dade County. The Mortgage Fraud Task Force website reveals that the division will be comprised of the following five committees:

• Law Enforcement Committee – responsible for the detection, investigation, apprehension and prosecution of the mortgage fraud subjects and enterprises.
• Legislative Committee – responsible for enhancing current laws, and creating new laws and ordinances.
• Regulatory Committee – responsible for enhancing and enforcing regulations of all parties involved in the mortgage transaction.
• Business Partnership Committee – responsible for creating and transmitting effective business practices to enhance cooperation with law enforcement and between different professions involved in the mortgage transaction.
• Education Committee – responsible for creating public awareness through printed literature, newspaper articles and television reports.

It’s about time something like this was enacted. Maybe now I won’t need to worry about finding new fraudulent transactions in the MLS anymore when compiling my monthly indices, in particular the Brickell Condo Index. Hopefully, this action will put a stop to this type of activity.

Some arrests have been made recently. Take a look at Case #1 and Case #2 to view a nice illustration of how the fraudulent activity took place.

crack crack…That’s the sound of the whip on the hind side of those who partook in fraudulent mortgage activity. These people participated in inflating the real estate bubble well beyond the point of insanity. It’ll be nice once mortgage fraud becomes less commonplace. Now, we’ll finally be able to get an accurate picture of the market.