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Thursday, September 21, 2006

Foreclosure Scams Prey On Suicidal Loans

Thanks to a few commenters in today's open thread for pointing out this article in today's P-I about foreclosure scams. Most of the article is dedicated to telling the tales of local homeowners that were scammed out of their homes, but there are a few quotes that are of specific interest to the bubble subject.

As rising interest rates and growing consumer debt push more families into financial trouble, consumer advocates and state investigators warn that people on the brink of foreclosure are increasingly falling victim to scams aimed at squeezing them out of their homes.
...
Foreclosure-rescue scams are on the rise as "a collision of events" force more people into foreclosure, said Chuck Cross, division director of the state Department of Financial Institutions, which investigates such fraud. Homeowners who took out mortgages they could barely afford or borrowed too much against their equity are prime targets.
If foreclosure scams are truly already an issue in our area despite the supposedly still robust housing market, imagine what it will look like when things really slow down. Yikes.

(Phuong Cat Le, Seattle P-I, 09.21.2006)

18 comments:

LoneLibertarian said...

When I was studying for the Bar Exam I read about some of this stuff.

It's amazing how people will do ANYTHING to stay in thier house including taking neg-am loans or give up title to thier house in order to lease it back at a rediculous rate with massive payment penalties.

This is the type of mentality that is going to make for a LONG fall.

Anonymous said...

People are very very loss averse. They will hold a stock far longer than they should. Given the illequidity of the housing market, many will put their house on the market at too high a price, take it off the market, lower the price to below what it would have sold for before, and still be priced too high to sell. The key with selling a house is the first week. If you are serious about selling, you need to do what it takes, especially in a falling market. But most people have already set a "floor" on the value of their house, and refuse to be "cheated". It's the hunters catch monkeys, they put treats in jars with openings too small for the monkey to remove both their hand and the treat. The monkey grabs the treat and refuses to let go, even though he can't get it out of the jar. Then the hunter can just scoop him up.

disgruntledengineer said...

Yes, the unwinding of this bubble will allow us to view a true-to-life example of game theory, right before our eyes. I personally find this stuff really interesting. The first participants to dissent will have the greatest reward...the longer you participate, the less reward you will win...

Anonymous said...

This whole market thing will turn on a dime. Oil and gasoline prices have gone down and this puts more money in consumers' pockets and will spur them to spend, which will reignite the economy. Rumors about rapidly slowing housing market are probably more than enough to keep inflation, spending and the Fed at bay for much of the rest of the year, if not well into 2008.

I believed we would see a soft landing for the economy by year-end, especially with companies like Oracle, FedEx and Morgan Stanley continuing to post strong earnings. For RE, I foresee no landing at all, only a slow steady rise.

The fact that core consumer inflation slowed is good news and says the Fed was right to hold the line on a rate increase a month ago. Add in the fact that the producer price index numbers show a slowing in both core and finished goods inflation, and the stage was obviously set for the Fed's decision yesterday to continue holding interest rates where they are. That also sets the stage for lower inflation for the remainder of the year and into 2007 at least, and I believe that the RE market will surge.

I think it's pretty obvious why the REIT Index remains the top fund for the year, up over 24%. It's all about fundamentals.

StealthBucks said...

OK, Just a couple of thoughts. 1st, this PI article is pretty one sided. I am pretty sure these outfits are shady but both examples appear to of failed to pay anything to anyone. Perhaps they were wrecked already going in to these deals and should of bailed on the home in advance. They both appeared to be grasping for a savior; much like the truck driving/nursing/court reporter schools advertised during soaps. I don't think this article adds much value.

Second, there may be a Seattle Bubble in Real Estate coming but I would also like to mention that real estate is tied to employment. I have lived here for almost two decades and I can say that EVERY, and I mean every friend/relative/human I know is fully employed and doing pretty well. When this changes (and you can certainly let me know) then I see a bubble ready to deflate. Ask your friends how many of them are 100% debt financed on their home, then get on line at "San Diego" bubble (if such a blog exists) and note the difference in fundamental leverage. You will be shocked. We are not yet So Cal.....

Anonymous said...

I think it's pretty obvious why the REIT Index remains the top fund for the year, up over 24%.

Me too. There's a huge housing bubble going on.

It's all about fundamentals.

Indeed, monkey boy. Hold on to that treat....

Lake Hills Renter said...

Second, there may be a Seattle Bubble in Real Estate coming but I would also like to mention that real estate is tied to employment.

You think one is coming? It's long been here already.

Real estate is tied much more to wages than employment. Someone making $10/hr is employed, but probably can't afford real estate.

The house I'm in has almost doubled in appraised value in the last few years, but have wages doubled? Some reports show they've actually done down in the same period. That's why the run-up in housing prices we've seen is unsustainable, they've divorced from actaul earnings.

If it weren't for the massive increase in ARMS and I/O loans during the same time period, I don't think we would have even seen a bubble at all. And when those come crashing down, thus pops the bubble.

It's all about fundamentals indeed.

Eleua said...

anon 556/Larry,

Do you actually believe the government's inflation numbers? Are you THAT dumb?

Do you know how they are calculated?

If you actually believe gov't numbers, you are going to be very poor in the near future.

BTW, while I thank you for not posting your picture, you aren't fooling anyone with your anon handle.

E

Eleua said...

Oil and gasoline prices have gone down and this puts more money in consumers' pockets and will spur them to spend, which will reignite the economy.

Wishful thinking...

Today, I passed by Chevron in Poulsbo, and 87oct was selling for $2.74, off its recent high of $2.99 - a whopping 25 cents. While I enjoy paying less, it is not the stuff of financial sugarplums.

Let's say I drive my car 24000 miles per year (I drive it about 10K), and I get 24mpg. That's 1000 gallons of my favorite hydrocarbon. 25 cents per gallon, is $250/yr, or less than $21/mo.

I don't think that is the stuff of $900K Bainbridge starter homes, or your garden variety, BestBuy, big-ass, High-def lobotomy box.

$21/mo is two movie tix, or half-dozen Starbucks Mocha-frappes, or one router bit, one CD/DVD, or some other small item.

In reality, that $21 would buy 8 gallons of gas, which is an extra 200 miles per month, or an extra 12 miles each way on a typical weekend day. I don't think it's 1984 all over again.

Eleua said...

Rumors about rapidly slowing housing market are probably more than enough to keep inflation, spending and the Fed at bay for much of the rest of the year, if not well into 2008.

1 out of 3 isn't bad, if you are hitting for the Mariners.

Larry, it's more than rumors. The housing market is slowing (can't you figure that out, just by looking out your window in Arid-zona?)

You are correct about it keeping the FED at bay, but [gov't]spending and inflation won't be abated by the cooling housing market. Personal spending will be. So much for your "reignite the economy" premise.

plymster said...

stealthbucks - ... I would also like to mention that real estate is tied to employment.

Let's talk about how the collapse of the housing bubble is tied to jobs. If you note, jobs are not vanishing en masse in California, Atlanta, Boston, Florida, Denver, Arizona, Vegas, etc. However, those RE markets are collapsing. So ends the myth that you must lose jobs to lose RE value.

However, WaMu, Countrywide, RE Developers, RE agents, title companies (Hopefully it won't hit S Crow and Mrs. Crow too hard), and other RE related industries are dropping employees like flies.

RE is tied to employment, just not the way you think.

StealthBucks said...

I guess, I should clarify my belief. Seattle, is different than So Cal right now, and has always been different than Phoenix. Real Estate prices are tied to jobs, we are lucky enough here that the cycle of employment is generating well paying jobs. These well paid positions make Seattle less likely to experience a serious real estate crash. Do I see signs of a slow down? Yes... Crash? no. Will some really silly risk taking ARM addicts get crushed? Absolutely. Does this mean every real estate owner will? Definately not. I think every one here is saying the same thing.... Dumb people or "Fools with their money" are most always destined to part. If you make only $10 an hour and rent. Focus on doubling your income and when you no longer need to lever up 100% on a home you can't afford to own... then find a place you want to live in and assume that you may not make much over the next 5 years or so in home equity gains. Or keep renting and save money elsewhere....

These goofy ARM's and funky financing methods will always be out there for a stupid person to do damage to their lives and finances. Don't blame the sales guy for selling to mindless goofs. Buyer beware....

All this attitude existed when the .com crash occured as well. I guess we shouldn't get pleasure out of the misery of others. Feel for those so compelled to lever their lives.... Choose not to be one of them....

Last thought, a home in my neighborhood just sold after one day on the market... We are not a cold market yet....

Lake Hills Renter said...

Stealthbucks, while I may disagree with some of your predictions, thanks for clarifying your position and being civil about it. Too much attitude and namecalling here lately.

Lake Hills Renter said...

Last thought, a home in my neighborhood just sold after one day on the market... We are not a cold market yet....

I've been watching the houses on my drive to work (eastern Bellevue/Redmond) and I'm definitely seeing more houses on the market and they are sitting longer. Some have been up for a month, which is a drastic change from just a few months ago. Occasionally one will sell, particuarly condos, but more come on the market. And I've seen a couple go up then come down a few weeks later without the occupants ever moving. Compared to last year and earier this year for the same area, this market has definitely stalled. And this started before Labor Day.

My venture into Kirkland yesterday was even more eye-opening. There were houses for sale on almost every block, and sometimes two or three. And right next door would be a multi-unit complex either proposed or actively being built. I don't know how long these have been on the market since I don't get the Kirkland very often, but I was amazed at the sheer number of signs.

plymster said...

LakeHillsRenter - Darn you to the fiery bowels of heck! I had this scathing rebuttal to stealthbucks, and then I read your Too much attitude and namecalling here lately post.

How's this for namecalling? LakeHillsRenter is a:
- diplomat
- level-headed reasonable person
- respectful, active participant of this board
- calming influence on those of us who get our kicks from spewing negativism and vitriol
- renter who lives in an area known as "Lake Hills"

Take that!

StealthBucks said...

lake hills....

I also agree on the stalled or stalling comment. This is ok by me for what I fear next is one big giant tax reassesment.

Lake Hills Renter said...

How's this for namecalling?

That's the kind of namecalling I like. Thanks! :)

Home Equity Theft Reporter said...

These "foreclosure rescue" and “foreclosure bailout loan” scams are going on all over the country.

Check out:

The Home Equity Theft Reporter at

http://HomeEquityTheft.blogspot.com

for links to stories about "foreclosure rescue" scams & other "home equity theft" scams (& the people victimized by it) from around the country and

For help for foreclosure scam victims in seeking out low-cost (& possibly free) legal assistance, try:

Low Cost Legal Services Available To Eligible Homeowners at

http://HomeEquityTheft.blogspot.com/2006/12/low-cost-legal-services-available-to.html