Friday, April 20, 2007

Gary Crabtree exposes fraudsters

Local appraiser exposes mortgage fraud. My only question is who are these people he has exposed? Are they locals?

From the Baltimore Sun:

Gary Crabtree, president of Affiliated Appraisers in Bakersfield, Calif., documented the practice recently for the FBI and state financial and real estate regulators. The basic scenario, said Crabtree, involves realty agents who have listed houses that aren't selling. To move the properties, they entice buyers - or friends - to "submit an offer [for the home] that is $30,000 to $100,000 above the current list price," with the promise that they'll get substantial cash at closing.

The realty agents then amend the Multiple Listing Service asking price up to the artificially inflated offer price. A house that had been sitting for months with no takers at $450,000, for example, might be relisted by the agent at $525,000.

Then, working with a cooperative appraiser who has promised to "hit the number," and an unscrupulous mortgage broker who simply wants the commission, they "change the [loan] documentation to reflect the [artificially inflated] sales price." The loans typically are for 100 percent of the price of the house. The seller nets the price he or she had originally listed - $450,000 in this example - and the buyer gets a portion or all of the $75,000 inflated differential as cash at closing.

The wholesale lender purchasing the loan from the broker doesn't look hard at the appraisal, and funds the excessive loan amount none the wiser. Public records do not reflect the $75,000 slush in the transaction. The realty agents and loan brokers pocket their commissions; the buyer pockets the cash from the closing proceeds, makes loan payments for a while and then stops. Within months, the property is headed to foreclosure.

"It's total fraud, of course," said Crabtree, who is documenting 32 cases of alleged appraisal hanky-panky for state regulators and the FBI. "You can throw a dart at just about any large subprime lender, and something like this [scheme] is going to stick."

Yet some lenders are in denial that they've accepted grossly inflated appraisals. Crabtree said he contacted one major East Coast lender with the documented details of a "cash back at closing" scheme that he submitted to state regulators. So far, the lender has not even returned phone calls, according to Crabtree.

To compound the problem beyond the individual foreclosures themselves, the inflated selling prices of the homes involved remain "in the system" for use as "comparables" for valuations in the coming months. That $525,000 recorded closing price on the house that wasn't selling at $450,000, in other words, might now be available on the public records as a "comp" for overvaluing future sales.

9 comments:

HermesAurelius said...

Gary Crabtree in the Balitmore Sun? This is local news, with a big bite. Wondering why the local media isn't picking up on this...helllllooooo...Bob Price....anyone....?

BIll said...

Appraisers are indeed the heart of the problem. "if the value is not there, there is no loan". Period. A mortgage broker cannot do a thing if the value is not GUARANTEED as reasonably accurate by an appraiser. The borrower cannot lie about their income to compensate for a lower than required apprasial value. It's value or nothing.
I don't care what sort of 'pressure'; these crybaby liar appraisers were faced with, they sold their souls for the lousy $350 they got paid for an appraisal. Title companies are also culpable. There's no cash back unless they allow it. Checks are disbursed by title companies and a check would never go to the buyer without great debate and verifiactions, unless they are involved in the fraud. Mortgage Brokers simply offer programs that are supplied to them. Simply, they offer a program with the greatest reward to the broker, just as a car salesman, a dentist, an optician, that girl at Nordstroms that lied and told you how great you look in that vomit green cardigan, any other 'paid per piece' salesperson would. They are not priests, they are salespeople. If brokers don't offer it, they are discriminating. Since they aren't appraisers, they by law cannot dispute the value presented to them. it requires aappraisal license issued by the State to dispute the value. Brokers have to by law offer every loan available to any liar/buyer that walks through the door and then have to consider the appraisal correct. If you [you personally] qualified for a loan and thought the loan officer kicked it out because he believed you were a fraud or that the value was incorrect, or that you were not understanding the ramifications of an ARM, you'ld sue the hell out of him, and win with a jury because the appraisal 'expert'appraisor would cry at the trial, and the liar borrower would say they were turned down because the loan officer disliked Smurfs or Cenobites or poor people, or the 'truth challenged' or whatever flavor would make the jury believe that discrimination took place. Lord help you if you run into one of these borrowers. They lied on the 1003 [maybe with a prompting but there would be no prompting if the value wasn't there, it's a case of appraisal lies allowing all other lies to anifest], why wouldn't they lie to the jury. I don't believe it takes any sophistication to lie. It's the second talent learned by a every child, right after begging, potty training is way down the line on learned activities

BIll said...

Please don't grind me on spelling. It took me about two minutes to type this, please read context and thought patterns not my inability to use a spell checker or my silliness in not prooreading.....

Bakersfield Bubble said...

No problem Bill.

Patient Renter said...

Great to see this covered a bit by the MSM.

xs10shell said...

If you search Crabtree's name you can find articles (mostly in industry publications) where he has been hinting at this for several months. I think he is very courageous to move on this.

SOCALAPPRAISER said...

Bill,

Are you a loan officer or broker? Appraisers sign on their certs that they are liable to civil and criminal penalty for misrepresentation or negligence.

If there was actual enforcement or even a decent ambulance chaser, the corrupt ones could easily be nailed to the wall. It would certainly thin the herd a bit.

When throwing stones remember that an appraiser has usually 2 years of apprenticeship that he /she will be throwing away should they be caught on the dark side for their $350 a pop. The average loan scumbag / officer?... it requires more schooling / training / licensing for a beautician's license in California than it does to deal in loans where some (most) people are making the biggest financial decision of their lives!

To paraphrase your post "they lied with a little prompting but......" - says it all. I wish all the skells and excuse makers would get nailed as my "expert witness" testimony business would pick up even more than it has. I just finished in a civil action where the scumbag broker had to settle for about 85k to a 72 yr old woman he put in a neg am product. My paycheck on that was fat (16 billable hours for only 20 minutes of testimony and cross).

Please keep up the fraud, my kid has a shot at ivy league schools but we won't be able to qualify for affirmative action type help / scholarship. So all we have is me pissing all over the fraudsters from the stand and charging fees to lawyers without a conscience.

Bakersfield Bubble said...

"about 85k to a 72 yr old woman he put in a neg am product"

This is the stuff that really pisses me off.

There was a brokers on one of the chat rooms who used to brag about placing old people in POA's. Then would go to another mortgage house and do it again to the same people. GRRRRRRRRRRRRRRRRRRRR!

underwriter said...

I think we need to go after some appraiser's E & O and get rid of about half of the brokers out there. I have been in this business for 26 years. The industry has "encouraged" these fly by night brokerage firms who,instead of employing real loan processors, they save money by hiring paper pushers and fax clerks that have no idea what they're doing. The lender has the dubious task of trying to sort out the good loans from the bogus ones and stay in business at the same time. I wish there were more appraisers like Gary out there. In the meantime, my exclusionary list is off the charts!