How Herald-Tribune identified $10 billion in suspicious flips (in Florida)

[Robbien]

Source: Herald Tribune

It is impossible to determine exactly how much housing fraud occurred during the recent real estate boom. But the Herald-Tribune used commonly accepted indicators of fraud to sort through 19 million sales and highlight those that raise clear red flags for one type: illegal property flipping.

The newspaper looked for properties that sold at least twice in three months and increased in price by 30 percent or more. Even during the real estate boom's hottest days, average home prices increased at only half that rate.

More than a dozen real estate and fraud experts interviewed by the Herald-Tribune said such price increases alone are enough to make the flips highly suspicious.

Across Florida, the newspaper found 50,000 property deals involving $10 billion in sales that met the criteria for likely fraud.

Each of the experts, which included Florida mortgage fraud investigators, nationally recognized academics and bank fraud-prevention consultants, said the Herald-Tribune's methodology was sound. Most said $10 billion was a reasonable estimate and at least three said the figure underestimated flipping fraud.

Read more: http://www.heraldtribune.com/article/20090719/ARTICLE/907191025/2055/NEWS?Title=How-Herald-Tribune-identified-10-billion-in-suspicious-flips

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from another article
http://www.heraldtribune.com/article/20090719/ARTICLE/907191031/-1/NEWSSITEMAP


The deals -- many of them inflated sales among friends, family and business associates -- drove up property values and tax bills during the boom, fed bank bailouts and failures after the boom, and fueled the foreclosure wave that has gutted property values.

Unscrupulous property flippers would buy houses or condos, then drive up the price in a few days or weeks by selling it to someone they knew. Buyers used the inflated price to get bank loans for more than the property was worth, leaving money for flippers to split as profit.

Despite their role in one of Florida's largest white-collar crime sprees, the vast majority of unscrupulous real estate flippers will never be prosecuted. Most Florida law enforcement agencies have done little to investigate property flip fraud. The FBI has been left to chase far more cases than it can handle.

But evidence of illegal deals is available in the public records filed when a property changes hands.

The Herald-Tribune spent a year gathering and reviewing nearly 19 million Florida real estate transactions for red flags that can help identify flipping fraud.

[Frustratedlady]

1. This type of fraud should be prosecuted.

If this isn't a prosecutable crime, it should be. Ft. Myers is inundated with vacant houses and what is selling, is going for under half the original price. Brand new homes.

[pokercat999]

3. My guess is that these half price homes will fall by another 40%

or so in the next two years. I have cash waiting for my opportunity to buy at 30% of the peak.....maybe less. The area I would like to buy in is Brevard county.

[The Backlash Cometh]

12. It won't be prosecuted.

Since th eighties, the legislature has been infiltrated by people who began their careers in the real estate business. They have been loosening up the laws, making it difficult for anyone to even find an agency in Florida that's friendly to the public on these matters.

[elehhhhna]

18. the inflated valuations are the key --

whether performed by the lender or an independent contractor, they're very well documented -- and prosecutable. It's called fraud.

[ixion]

2. yeah, they're far too busy harassing pot smokers to worry about fraud

:eyes:

[hedgehog]

4. Legal or illegal, I'm starting to think that housing bubbles

in California, the South and Southwest created the illusion of a booming economy in those places the last 30 years. People shook their heads in sorrow and said that the Rust Belt, the North east and the Midwest were dying because these places depended on manufacturing and manufacturing was yesterday's economy. I think in fact, the entire US economy was built on a mirage in those year. Instead of taking in each other's washing, we were selling each other our houses.

[BumRushDaShow]

15. Bingo, bingo, and BINGO

The lies and lies, pushed on by the M$M and their dizzying "Sun Belt, Sun Belt, Sun Belt" mantra and crap about those areas having "the fastest growing counties" blah blah. Which inturn, IMHO, falsely inflated the census estimates in those areas, prompting builders to flock there to build more and more, with no FACTUAL evidence of any "real" hoards moving there... If anything, the question should have been, "What industry is there that could maintain as many people as are claimed to be moving to these places?".

Now the chickens come home to roost. It makes me sick every time the media uses the idiotic term "Rust Belt". Excerpt for the car industry, the "manufacturing" in much of what was once called the "Rust Belt" disappeared 30 years ago and the cities have since moved onto other things. The "rust" has long since been scraped off revealing the shining cities of the east. Meanwhile the abandoned "ghost towns" of the west are multiplying like crazy.

[hedgehog]

16. Unless you've got something to trade, you've got nothing.

Maybe we make different things, maybe we make the old things more efficiently, but we've got o make something to trade.

[no_hypocrisy]

5. I worked for an attorney in NJ who handled these tranactions six years ago.

His cousin was a "broker" who brought in these deals. We would get a contract to buy a property and before it closed, we would get another contract for the same property to sell it for a profit, often the closing dates being within days of each other.

[rfranklin]

8. Everyone involved knew what was going on, but ....

there was plenty of money to be made while the merry-go-round was running.

[Demeter]

6. I'm Stunned

The corruption of the country is complete.

[bluedigger]

7. The sad fact is

that, in large part, we have become a nation of grifters. Once you stop making stuff, there's nothing left to do but steal other people's stuff.

[kcass1954]

9. I worked for same-day flippers for not quite a year in 99-00.

Interesting business. They snatched up distressed properties from desperate sellers with $1000 down and a 30-day cash closing. During the 30 days, they aggressively marketed the property so they could do a same day flip. If they couldn't re-sell it, they walked away, with just a $1000 loss. That was just the unethical part.

The illegal part was that all closings took place at our attorney's office, with the re-sell closing taking place first, so they'd have the funds to then do the purchase transaction.

I was the admin in the office, hired to keep the paper flowing. It took me a while to realize just what was going on. I was actually relieved then the owner decided to close the office I worked in.

[no_hypocrisy]

13. I'm not surprised that a deed with no legality and power to transfer was used (i.e.,

reselling before the purchase of the same property). How did you get around the title insurance, assuming that you used any?

[kcass1954]

21. Our attorney handled both closings, and did all of the title insurance.

In addition, the financing for the transaction from the company I worked for to the wanna-be flipper was provided by a mortgage company owned by the company I worked for.

[no_hypocrisy]

24. That's classic.

Really incestuous.

[nashville_brook]

23. was this an attorney-run title closing office? like, that did title insurance?

i'm just curious b/c i have a notion that another facet of the fraud is that the little closing offices were doing that sort of crooked business with complicity at the upper reaches of the title insurance pyramid. that, they knew they could float paying off first-in-line mortgages b/c if the fraud crumbled the "friendly" title insurance company would payoff the bad debt with almost no auditing and no accountability. i'm seeing an old boy network where agents were getting away with large scale fraud, and the people who are supposed to have vested interest in keeping them honest dropped the ball so spectacularly, that the only explanation is complicity.

[Festivito]

10. Charge little guys with fraud while the banksters get tax-payer paid bonuses.

BTW who gave the seed money for the raise in house value, someone rich, or the bank that made money creating the new loan?

Hmmm.

Then the bank made even more money reselling the loan as an insured bundle and then lent more money based on calling that earlier loan as-good-as-money, and in order to lend more money they cared a little less about who the borrower would be. After all, the ones buying the bundles were foreigners who sent us cheap stuff to put in Wal-marts, so even the far-off idea of default was not unthinkably awful. And, it had insurance. So, on they went.

Now, we want to blame the flipper listening to the cable channels describing how to flip houses.

Hmmm.

[The Backlash Cometh]

11. And you have to wonder, how much of it was quid pro quo

"The deals -- many of them inflated sales among friends, family and business associates -- drove up property values and tax bills during the boom, fed bank bailouts and failures after the boom, and fueled the foreclosure wave that has gutted property values."

You want a formula to commit fraud in Florida? Get a real estate license and cozy up to a law firm that has a long reputation representing municipalities in the State.

[Vidar]

14. Certainly bad enough but a mere shadow of what the banks & politicians are guillty of.

[hedgehog]

17. Is it only a coincidence that the states with the tightest controls

on banking missed out on the housing boom?

[Frustratedlady]

22. I don't know how tight our controls are, but I know our housing prices

haven't fluctuated like Florida, California and other hot states that are now in trouble.

Regulations on real estate, insurance, pharmaceuticals and banking should be locked so that no reigning party can eliminate them. I know that's impossible, but dang! They come in and screw things up before the public catches on to what they are doing, then leave us the crap to clean up after they leave.

These people will be the first ones to scream when they raise the taxes on them to pay for health care.

I had a person complaining to me yesterday about how Obama was going to bankrupt them by taking more money for the healthcare changes. I asked if he was getting his healthcare from Medicare? That shut him up. He was working with his son, who is in the medical field, to figure out a way to shield their wealth until the Repugs could get back in office.

Nice guy, but typical Repug thinking. "Not from my bank account, you won't!"

[bread_and_roses]

19. Fraud? What fraud? That's just good Capitalism in practice

take the biggest short-term profit you can make, and run with the money.

[bluesmail]

20. Good thing that unscrupulous guy Madoff

is behind bars. (sarcasm)

[Wednesdays]

25. K&R

:kick: