Tag Archives: real estate agents

FBI Hits Mortgage Fraud with “Operation Malicious Mortgage” — 400+ Indictments and the Arrests of Two Bear Stearns Execs

The FBI announced today that the Justice Department’s crackdown on mortgage fraud has resulted in more than 400 indictments since March — including dozens over the last two days.

Those arrested run the gamut of players in the mortgage industry, including lenders, real estate developers, brokers, agents, lawyers, appraisers, and so-called straw buyers.

The Department of Justice’s name for the crackdown is “Operation Malicious Mortgage,” which it describes as “a massive multiagency takedown of mortgage fraud schemes.”

According to the FBI, the on-going “Operation Malicious Mortgage” focuses primarily on three types of mortgage fraud — lending fraud, foreclosure rescue schemes, and mortgage-related bankruptcy schemes.

“To persons who are involved in such schemes, we will find you, you will be investigated, and you will be prosecuted,” said Federal Bureau of Investigation Director Robert Mueller. “To those who would contemplate misleading, engaging in such schemes, you will spend time in jail.”

In its statement, the FBI said that “Among the 400-plus subjects of Operation Malicious Mortgage, there have been 173 convictions and 81 sentencings so far for crimes that have accounted for more than $1 billion in estimated losses. Forty-six of our 56 field offices around the country took part in the operation, which has secured more than $60 million in assets.”

While most of those indicted so far are relatively small players in the industry-wide fraud crisis, Mueller today repeated his earlier promise that federal authorities are not ignoring the major players in the mortgage industry, but are investigating some “relatively large corporations” as part of its sweeping mortgage-fraud probe, including some 19 large companies, including mortgage lenders, investment banks, hedge funds, credit-rating agencies and accounting firms.

Most of these corporate fraud investigations, said Mueller, deal with accounting fraud, insider trading, and the intentional failure to disclose the proper valuations of securitized loans and derivatives.

The FBI’s announcement of Operation Malicious Mortgage coincided with the indictment and arrest in New York on Thursday of two former Bear Stearns managers, Ralph R. Cioffi and Matthew Tannin, who are charged with nine counts of securities, mail and wire fraud resulting in $1.4 billion in losses on mortgage-related assets.

According to the New York Times,  Cioffi and Tannin “are the first senior executives from Wall Street investment banks to face criminal charges, and the investigation by federal prosecutors based in Brooklyn is likely to become a test case of the government’s ability to make successful prosecutions of arcane financial transactions.”

“This is not about mismanagement of a hedge fund investment strategy,” said Mark J. Mershon, the head of the New York office of the Federal Bureau of Investigation at a news conference Thursday afternoon. “It’s about premeditated lies to investors and lenders. Its about the defendants prostituting their client’s trust in order to salvage their personal wealth.”

 

Realtors Settle Anti-Online Broker Lawsuit with Justice Department — NAR Agrees to Stop Blocking Access to Web Listings

Online realtors will now have the same access to Multiple Listing Service (MLS) data and other services as traditional real estate brokers, according to a proposed settlement reached on Tuesday between the U.S. Justice Department and the National Association of Realtors (NAR).

In September 2005, the Justice Department’s Antitrust Division filed an antitrust lawsuit against NAR charging that its obstruction of Internet based reatlors and its restrictive MLS policies were stifling competition and hurting consumers. The Justice Department said that these policies prevented consumers from receiving the full benefits of competition, discouraged discounting, and threatened to lock in outmoded business models. 

The case was scheduled to go to trial in federal court in Chicago in July 2008.

Under the terms of the settlement, brokers participating in a NAR-affiliated MLS will not be permitted to withhold their listings from brokers who serve their customers through virtual office websites (VOWs). 

In addition, brokers will be able to use VOWs to educate consumers, make referrals, and conduct brokerage services.  Such brokers will not be excluded from MLS membership based on their business model. 

NAR agreed to report to the Justice Department any allegations of noncompliance.  NAR also has agreed to adopt antitrust compliance training programs that will instruct local Associations of Realtors about the antitrust laws generally and about the requirements of the proposed settlement

You can read the proposed settlement here.

“Today’s settlement prevents traditional brokers from deliberately impeding competition.  When there is unfettered competition from brokers with innovative and efficient approaches to the residential real estate market, consumers are likely to receive better services and pay lower commission rates,” said Deborah A. Garza, Deputy Assistant Attorney General of the Antitrust Division.  “In addition, under this settlement, NAR will foster compliance with the antitrust laws by educating its members and its 800 affiliated MLSs.”

According to the Justice Department, “the first rule challenged by the Department required MLSs to permit traditional brokers to withhold their listings from VOWs by means of an ‘opt out’  NAR does not permit brokers to withhold their listings from traditional broker members of an MLS.  Many local MLSs adopted NAR’s policy before NAR suspended its policy during the Department’s investigation.  In one market in which the MLS adopted the policy, all brokers withheld their listings from the one VOW in the community, which was then forced to discontinue its popular website.”

“The second rule prevented a broker from educating customers about homes for sale through a VOW and then referring those customers (for a referral fee) to other brokers, who would help customers view homes in person and negotiate contracts for them.  Some of the VOWs that focused on referrals also passed along savings to consumers as a result of increased efficiencies.

“Collectively, NAR’s policies prevented consumers from receiving the full benefits of competition in the residential real estate industry.”

NAR called the settlement a “favorable” conclusion to the Justice Department’s antitrust lawsuit.  “This is clearly a win-win for the real estate industry and the consumers we serve,” said NAR President Richard F. Gaylord.

NAR points out that the final order expressly provides that NAR does not admit any liability or wrongdoing and NAR will make no payments in connection with the settlement.

The proposed settlement between NAR and the Justice Department still needs to be approved by a federal judge.

 

 

Disgraced Congressman Vito Fossella Comes Out of Hiding to Meet with Realtors

Realtors in Staten Island, New York, must have a lot of political clout — enough political clout to get disgraced Congressman Vito J. Fossella (R-Staten Island/Brooklyn) to come out of hiding.

As the Staten Island Advance explained: “The married congressman has been in a virtual media lockdown since his arrest May 1 for drunken driving in Alexandria, Va., and his subsequent revelation that he fathered a child with the woman who fetched him from jail.”

Fossella was a no-show Wednesday at a scheduled meeting with the Staten Island Chamber of Commerce.

Yet Fossella met on Thursday with several representatives of the Staten Island Board of Realtors in what was apparently his first official face-to-face meeting with Staten Island constituents since his DUI arrest and subsequent infidelity scandal.

Staten Island Board of Realtors’ president Dawn Carpenter reported that Fossella “appeared to be in good spirits and we had some community laughs with him.”

We’re not sure what either Fossella or the realtors had to laugh about. 

Staten Island has been severely hit by the housing meltdown and foreclosure crisis.  Single family home sales in Staten Island fell by 36 percent, and prices fell 6 percent from February 2007 to February 2008.  In the past seven months, home sales in Staten Island have dropped 40 percent.

Foreclosures in Staten Island continue to rise.  There has been a 400 percent spike in Staten Island foreclosures in the first quarter of this year.  Houses are also taking longer to sell, and much of this growing inventory is coming from owners selling before they have to face foreclosure or a short sale.

We’re also not sure why realtors, who have their own extreme PR problems — realtors and agents have come in dead last in the Harris Poll survey of the prestige of various occupations every year since they were first included in 2003 — would want to be the first to publicly embrace the hypocritical Congressman.

Perhaps it’s because Fossella pushed for a $10,000 tax break for home buyers.

Or perhaps the realtors believe that Vito Fossella is a positive role model for the homeowner of the future.

If everyone did what Fossella has done — have two separate families at the same time — it would double the demand for housing.  

That may be bad for wives and children, but it would certainly be good for realtors.

UPDATE:

Fossella announced on May 19 that he would not be running for reelection. 

Staten Island Republicans then selected retired Wall Street investment executive Francis H. Powers to run for Fossella’s seat in New York City’s only Republican Congessional district. 

Powers, 67, died on June 23.

Republicans may not be able to field another candidate, since the process of collecting the signatures required to allow candidates to qualify for a place on the ballot ends in roughly two weeks.

Democrats Michael E. McMahon and Stephen A. Harrison have already announced their intention to run for the seat.

Don’t be surprised when Fossella puts his hat back in the ring.

Here is the New York Times report on the story.

 

Seasonal Boost in Southern California’s Home Sales Lowest in 20 Years — Median Home Prices Continue to Fall as Foreclosures Rise

According to DataQuick, “The onset of spring did little to thaw Southern California’s semi-frozen housing market: The seasonal boost in sales between February and March was less than half its normal level and a record low.”

The data shows that 12,808 new and resale homes and condos sold in Southern California Los Angeles, Orange, San Diego, Riverside, Ventura, and San Bernardino Counties in March. 

Although that figure was 18.8 percent higher than the 10,777 sales reported in February, it was down 41.4 percent from March 2007.

In addition, while DataQick’s statistics show an average seasonal increase of 38 percent in sales between February and March for the last 20 years, the 18.8 percent increase for March 2008 was the lowest seasonal sales boost in DataQuick’s records, which go back to 1988.

As expected, the data showed a continued increase in foreclosure resales and a decline in median sale prices.

More than one out of three Southern California homes that resold last month, nearly 38 percent, had been foreclosed on at some point in the prior year.  Last year such sales were only 8 percent of the market.  At the county level, foreclosure resales ranged from 28.8 percent in Los Angeles County to 56.4 percent in Riverside County.

The median price for a Southland home last month was $385,000, the lowest since $380,000 in April 2004. Last month’s median was down 5.6 percent from February’s $408,000, and down a record 23.8 percent from $505,000 in February 2007.

Significantly, the psychology of the current real estate market is creating its own downward drag on prices, as potential sellers are waiting for the market to hit bottom and potential buyers are waiting for prices to fall further. 

DataQuick president Marshall Prentice explained: “We continue to believe a lot of people who could be buying or selling right now are opting to sit tight until they sense we’ve hit bottom. Often what we’re left with, especially in inland areas, are sales driven by foreclosure or the threat of it.”

Here’s what we know:

Those who can hold on to their property are holding.

Those who can buy are waiting.

Like scene before the climax in an old Hollywood Western, the California real estate stand-off continues…

Or as Commander Bart Mancuso says in The Hunt for Red October: “The hard part about playing ‘chicken’ is knowing when to flinch.”