We have a winner. Net Bank FAILS, FDIC steps in.

From CBSMarketwatch.com:

The Office of Thrift Supervision closed down NetBank Inc. a thrift with $2.5 billion in assets, and appointed the Federal Deposit Insurance Corp. as receiver.

The OTS said the bank experienced significant losses beginning in 2006 due to defaults on loans sold, weak underwriting, poor documentation, a lack of proper controls and failed business strategies.

It was only the second bank failure in the past three years.

The FDIC said ING Bank has agreed to assume $1.5 billion of the failed bank's insured deposits.

Now for the really bad news; from the same article:

"NetBank had about $109 million in 1,500 deposit accounts that exceeded the Federal deposit insurance limit of $100,000. Those customers will become creditors of NetBank's receivership, the FDIC said."

DMJ Custom homes raid!!

UPDATE:

According to sources:

"BPD tells me they served a search warrant yesterday at the company owner's home in the 11-thousand block of Brightwater. He was not taken into custody. The warrant was for an investigation into "theft of construction funds."

From KGET.com:

BAKERSFIELD - Bakersfield Police raided have the home of a local homebuilder accused by some of his clients of taking their money and running.

The Bright Water Way home of Donald Juhasz was searched Tuesday, according to Bakersfield Police.

No arrests have been made, and no charges have been filed.

Juhasz created DMJ Customs in 2005. Since then, close to a dozen people have come forward saying Juhasz took money and didn't complete work.

Here is the Original Story from the Bakersfield Californian (9/17/07):

BY VANESSA GREGORY

The fireplaces are gone. They were repossessed from the half-built structure Ammanda and Thomas Meek thought would be their dream home.

All Burt Valencia has to show for his effort to have a custom home built by DMJ Customs, a home builder, is a sign with his family name on it which stands on his empty one-acre lot at the corner of Renfro and Henderson.

Ammanda Meek's home was never completed. She says the contractor took her money, leaving her with a partially constructed home. "I hate coming here, it just kills me," she said as she walked through the partially built house.

"It was 2,600 square feet, full custom," Ammanda Meek said. "It's framed and it's got a roof. That's as far as it got."

Original Post:

Recall the story by the Bakersfield Californain (I cant find the link) on the DMJ Custom homes fiasco. We can now confirm the story posted by privateeye :

Finally local government is taking action with fraudsters!! BPD raided DMJ Custom Homes aka Don Juhasz home/office yesterday. No one was home at the time, however, 3 boxes were taken from his home. Hopefully IRS will be next to collect on unpaid taxes. Hope the coward shows his face soon. Maybe he could be on KGET's panel as a local rip-off artist.

CA Foreclosures up 300%

From the Central Valley Business Times:

California foreclosure filings were up a dramatic 300 percent in August, compared to the same time last year, according to Default Research Inc., a Mt. Pleasant, Pa., foreclosure information company

Kern County reported 911 foreclosure notices last month, compared to 238 a year earlier.

Four indicted in Central Valley mortgage fraud scheme

From the Central Valley Business Times:

Four Sacramento area men have been indicted by a federal grand jury on charges of bank fraud and conspiracy to launder money in connection with what prosecutors are calling a mortgage fraud scheme involving at least 19 homes with loans of more than $8 million.

Accused are James Martin, 36; Mario Fellini III, 38; Gabriel Viramontes, 44; and Joseph Gallo, 34.

According to Assistant U.S. Attorney Matthew Stegman, who is prosecuting the case, the indictment charges that from June 2006 through October 2006, the men individually and through VFM Investment Group, Esnian Mortgage Realty, and Freedom Capital Mortgage, engaged in a mortgage fraud scheme by asking people to act as straw purchasers of single family homes on behalf of others with bad credit who wished to purchase homes.

Those solicited were told they would benefit financially from the transactions, prosecutors say.
The defendants defrauded lenders such as Washington Mutual Bank and Fremont Investment and Loan by submitting fraudulent loan applications, representing straw purchasers of homes as actual purchasers of homes, the government contends.

The indictment further charges that the fraudulent loan applications submitted on behalf of the straw purchasers falsely inflated the buyers’ income, falsely stated that a buyer was employed at a specific job, and falsely stated that the properties would be owner-occupied.

The indictment alleges that the purpose of the scheme was to ensure that the home purchase transactions closed, so that defendants would receive substantial loan broker commissions and illegal kickbacks from real estate sales commissions.

KGET real estate forum

KGET will hold a real estate forum this Sunday. Hopefully it will not turn into a perma-bull love fest like the one in the summer of 2005. My favorite quote was when John Busby stated prices would continue to go up 10-15% for the foreseeable future. Unless he meant the next foreseeable 15 minutes, he was obviously dead wrong!

We complained about that last one, now we get some input on this one. Post any questions or comments you would like asked. Also, post any guests you would like to see as part of the panel.

(sorry for the slow posting, I have been busy and working on another project which is consuming most of my free time).

Thanks!

Mortgage rates go up twice today.

As expected, the FED drops rates; then the dollar drops like a rock and interest rates rise.

Dollar is in the crapper compared to the Canadian and European currencies. Oil at an all time high and gold keeps going up. Meanwhile all of wall street makes out big time and the little guy gets to spend $100 to fill up his tank.


From today's Brokers Outpost:

What caused rates to go up twice today.... they are MUCH worse than before
the Fed even cut the rates....

To all those who claim rates will now start to go down

From the Telegraph :

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.

"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.

"Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.

The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg.

The risk is that flight from US bonds could push up the long-term yields that form the base price of credit for most mortgages, the driving the property market into even deeper crisis.

Also from the Telegraph:

China threatens 'nuclear option' of dollar sales

The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.

Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.

Shifts in Chinese policy are often announced through key think tanks and academies.

Described as China's "nuclear option" in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels. It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds.

Californian reponds to criticism from us

From the Bakersfield Californian:

Did they or didn't they commit fraud? Will they or won't they get jail time?

Who knows? Certainly not me. I'll leave that to the experts.

Speaking of experts, I'm getting a little fed up with the "I told you so's" from the so-called experts these days. Mostly, they're having their say anonymously on blogs, but we've received a few e-mails and phone calls as well.

The number of people in Bakersfield who apparently KNEW what was GOING ON with Crisp and Cole is amazing, considering how many people our reporters contacted in the local real estate industry over the last two years who refusedto talk to us -- or would only talk about rumors off the record.

That's right, I'm taking the task takers to task.

Be back

Out on business for a week. Anon comments disabled until I return.

Also, the FED will drop rates by 25 bps on Tuesday. Which is a mistake!

On-Line Run on the Bank

From Northern Rocks online website:

Unfortunately, the system is currently very busy.

We apologise for any inconvenience caused and ask that you try again later.

Thank you for your patience in this matter.

Words of the day.

I have a feeling, :), we will be seeing these words in the future. Thanks to the reader who sent this in.

1) Title Company

2) Subpoena

3) Last Thursday

Bank Run. Could this happen in the US?

From the Financial Times:

The turmoil in global banking hit the streets of Britain on Friday as thousands of Northern Rock customers queued up to withdraw their savings from the UK mortgage lender after it was rescued by the Bank of England.

As regulators and politicians called for calm, Northern Rock – Britain’s fifth-biggest mortgage lender – scrambled to contain the fallout after it became the first British bank in decades to be bailed out by regulators. One person close to the situation said customers had withdrawn about $2bn Friday but Northern Rock declined to comment on the figure, which would amount to 4 per cent of its deposit base.

The rescue demonstrates the risks from a decade of financial innovation in the capital markets, which allowed a small regional lender to wield financial clout far greater than its network of 76 branches would suggest.

It also shows how the turmoil in the financial system that resulted from excessive lending to Americans with patchy credit histories triggered the failure of a bank with no direct links to the US mortgage market.

Also from the Financial Times:

“I’m completing on a house next week and I’m transferring funds today instead of then,” said another depositor. “It’s just a precaution.” Whatever problems Northern Rock had with call centres and websites, the branch opened at 9am sharp and a relieved group of customers trudged in to move their money.

Late on Thursday lenders and borrowers had reported problems accessing the bank’s website after news of the Bank of England’s move was reported. The volume of traffic from depositors and mortgage holders had caused the website to freeze in an indication of the level of customer concern about the bank’s situation.

KGET responds to media criticism

Whipping Boys Or Asleep At The Wheel? Crisp Coverage Uncovered :

Ouch. I won't speak for all the media here, nor will I speak for the reporting of others.

But I believe in transparency.

Since I was handed this story several months ago, we've been working diligently on getting the story on the air. It takes longer than I'd like. Television news is a different beast than Online or print reporting. Yes, we need video. Of houses in question, of people, and of documents. Add to that the time that it takes to pull these records at the hall of records. Then, we have to track down key players and give them a chance to respond. When we go out and do that, we get a small but strident minority who say we're being too agressive and unethical. When I put a story on the air, I stand behind my work. I can't go on the air with a story without backing it up with documents and multiple sources. And many sources on this story were reluctant or otherwise unwilling to come forward. I talked with scores of members of the real estate industry who knew about the transactions that we reported in July, but were unwilling to discuss them on camera or even mention David Crisp Or Carl Cole.

CPA Comfort Letters

This was emailed to me by a reader. I have to wonder if this is allowed by the State Board of Accountancy?

During this boom it took three people to make a stated loan (or other toxic mortgage) happen. A lender, an appraiser and a CPA. We have already seen how things worked out for the lenders and appraisers.

The CPA had to issue a "CPA Comfort Letter". This letter provides "comfort" to the lender that that amounts stated on the loan documents are accurate for a stated income amount or stated assets:

*** New Lower Price ***
cpaLetters.com
We Provide CPA Letters For Borrowers Who Do Their Own Tax Returns.
Web Site Tel. 818 248-8469
••••••••••••••••••••••••••••••••••••••••••••••••
Close More Loans!
••••••••••••••••••••••••••••••••••••••••••••••••
What We Do: With the increase in people preparing their own personal tax returns, and the banks requiring a letter from a Certified Public Accountant that the borrower is self-employed, we have filled the gap. Upon verification that the borrower has filed a Schedule C we will issue a letter from a Certified Public Account that the Borrower has been self-employed for the past two years.

Tel. 818 248-8469 Fax. 818 248-3081 Web Sit: www.cpaLetters.com email: info@cpaLetters.com

Other Possible reasons you may need our services:
1.) The CPA is a party to the transaction
2.) The CPA company is out of business
3.) The CPA died
4.) The CPA is no longer on good terms with the borrower
5.) The tax preparer is a bookkeeper, not a CPA

FBI RAID!

FLASH!!

CONFIRMED FBI RAID ON CRISP AND COLE!!!!

UPDATE#5:

Some video from tonights news:

From KBAK TV 29

From the Bakersfield Californian

From KGET.com

From KGET.com

From KERO TV 23


UPDATE #4:

Bakersfield.com
The home of Crisp’s mother, Tu Crisp, at 12716 Crown Crest, was also searched by FBI agents. And at around 11 a.m. Wednesday, two men were seen being led from the home in handcuffs and into a Bakersfield Police Department vehicle.Spokesman Steve Dupre also said agents were searching the home of Crisp's in-laws, Kevin and Leslie Sluga, who live at 12403 Crown Crest Drive




UPDATE #3:

Sources state the following agencies issued 13 search warrants and the locations were raided by FBI, IRS, DRE, Bakersfield Police and Kern County Sheriffs.



UPDATE #2:

I just left the scene and several locations. WOW!!

Bakersfield Californian:

Federal agents served search warrants on several homes and businesses connected to real estate agents David Crisp and Carl Cole early Wednesday morning.

Californian reporters at Cole’s offices on Gosford Avenue and White Lane tried to talk with employees who were outside dealing with customers while agents were inside the offices. But employees refused to talk about the situation.

FBI agents were visiting 13 locations Wednesday morning and were seizing documents, according to Steve Dupre, special agent and spokesman of the Sacramento division of the FBI.

UPDATE #1:

KGET.com:

FBI agents and other federal authorities were searching the home and offices of real estate agent David Crisp and his family and associates Wednesday morning.

KGET's Jim Scott and Kiyoshi Tomono, who are on the scene, said dozens of agents and technicians are inside the gates of the Grand Island neighborhood at Seven Oaks in Southwest Bakersfield. Agents are at 13 sites, including the office of a real estate appraisal company, the FBI said.

Seven Oaks is, perhaps, Bakersfield's most prestigious neighborhood, and Grand Island is one of the most exclusive parts of Seven Oaks. Houses are priced at $2 million or $3 million or more.
Agents also were at Crisp's home in an even more exclusive gated community, across Buena Vista Road, in the 10500 block of New Quay Court, near the Seven Oaks clubhouse. They were at the Crisp and Associates office in the Town and Country shopping center.

The raids began at about 8 a.m. KGET crews said authorities appeared to be conducting a search. No arrests were seen.

On Monday, the California Department of Real Estate issued a formal accusation that Crisp and his former partner, Carl Cole, deceived mortgage companies to secure huge loans on luxury homes in the Seven Oaks area.

"I am a victim...I had no idea what Crisp & Cole or Tower Lending were doing. I trusted David and Carl."

Let the blame game begin. These folks now claim they were duped by David and Carl.

BEFORE you read today's story lets go back in time and see what the "victims" said before they were duped.

Sac Bee Puff Piece (Oct 2005):

"He got into the real estate business right when it was starting to boom here ... and he has just the right personality for it," said Crisp's mother-in-law, Leslie Sluga, who has bought and sold investment properties with his help. "You can't tell him 'no.' He just doesn't understand the word 'no.' It's kind of scary sometimes."

From today's Bakersfield Californian:

BY VANESSA GREGORY AND GRETCHEN WENNER,

The 25-page document says actions by Cole, Crisp and the employees constituted fraud, "dishonest dealing" and "substantial misrepresentations of material facts."

Cole "failed to take reasonable steps" to review loan applications and prevent false employment, occupancy and other statements on the loan papers, the accusation states.

Crisp, Pinheiro and Cole identified Sluga as a Crisp, Cole & Associates employee to induce SunTrust Mortgage, based in Richmond, Va., to issue $374,000 worth of loans to fund the purchase of 800 Astoria Park Drive, the report said.

To purchase 11504 Haydock Court with $1.7 million in loans from Anthem, Ariz.-based Kirkwood Financial Corp., the company identified Sluga as the owner of California Business Solutions, of Bakersfield, when she actually worked there as a bookkeeper.

"They used me to buy these properties that they wanted because I have good credit," Sluga said Monday.

Neither she nor her daughter had any knowledge of the activities mentioned in the report and her family is distraught, Sluga said. She says she signed loan documents, but never saw the applications.

"I am a victim," Sluga said. "I had no idea what Crisp & Cole or Tower Lending were doing. I trusted David and Carl."

PDF of Accusations of Fraud

State accuses Crisp & Cole of FRAUD

UPDATE: Be sure to watch Fox Channel 6 tonight at 10. They have an "interview" with Crisp.


READ THE Accusations!!!(warning pdf)


From KBAK TV 29:

The California Department of Real Estate is accusing the once high profile, real estate team of Crisp & Cole of fraud.

In a filing faxed to Eyewitness News, the state alleges eight causes of action against David Crisp, Carl Cole, their lending arm "Tower Lending" and three other associates. Among the accusations, fraud and dishonest dealings in several real estate purchases conducted by the now defunct Bakersfield firm.

Kiyoshi Tomono's Blog

From KGET.com:

BAKERSFIELD - The California Department of Real Estate has filed a formal accusation accusing David Crisp and Carl Cole and their now-defunct realty firm of fraud.

The accusation names Crisp, Cole, the Crisp & Cole firm, Tower Lending, and several others with whom they allegedly performed unlawful real estate transactions. The action could result in the revocation of the licenses of the accused.

None of the accused immediately returned phone calls from Channel 17. The accusation says the Crisp and Cole were guilty of fraud in how they got mortgages for some of the high-end southwest Bakersfield properties they bought in 2005.

California REOs up 471 percent in August

From the Central Valley Business Times:

The nation’s foreclosure abyss has widened with 11 states seeing triple-digit increases in August compared to a year earlier, says Foreclosures.com, a Fair Oaks-based foreclosure information service.

Through August, 355,624 homes have been taken back by their lenders following foreclosure, according to analysis of REO filings by the company. An REO (real-estate owned) filing is the final step in the foreclosure process and occurs when the bank or lender files notice that it has reclaimed a property for nonpayment of debt.

Eleven states have recorded triple-digit increases in REO filings so far this year compared to the same period last year, according to Foreclosures.com’s report Monday.

Among REO filings in August, states with triple-digit gains year over year are: California (with filings up 471 percent), Arizona (up 217 percent), Nevada (up 192 percent), New Mexico (up 157 percent), Florida (up 141 percent), Hawaii (up 138 percent), New Hampshire (up 119 percent), and Minnesota (up 112 percent).

Top realtor goes BUST!

From the Las Vegas Sun:

Jimmy Dague, who has sold real estate in Las Vegas since 1978 and whose business was the No. 1 worldwide in sales for Century 21 from 2002 to 2006, filed last week for Chapter 11 bankruptcy protection from creditors while he reorganizes to pay off his debts.

The 54-year-old said that even when his business was Century 21's top seller in 2006, he still lost money. Dague said that's because his sales fell 60 percent from 2005 to 2006, but he kept the same number of staff - and the same overhead - in his nine offices.

"This is the result of an exuberant market and us growing and, honestly, I had signed leases for nine offices. Now I have five," he said. "As you can imagine, the four landlords are not happy."

Rather than fighting it out in civil court - "I can't afford to fight the market and pay attorneys, too" - he went the route of bankruptcy. In court filings, Dague lists assets of between $10,000 and $100,000 and debts totaling between $100,000 and $1 million.

Osama Bin Laden worried about the housing bubble

We might be near the bottom(NOT!!) when the biggest jerk-off in the world is talking about the housing bubble:

“He also speaks to recent issues grabbing headlines in the United States, referring to “the reeling of many of you under the burden of interest-related debts, insane taxes and real estate mortgages; global warming and its woes…”

Almond market the next local bubble.

Almond prices peaked a few years ago @ $3.96 per lb and are now hovering around $1.87 per pound. It looks like some suckers have also joined this party just a bit to late to enjoy the fruits (nuts) of their labor! Good luck John Madden!

hat tip to Lander:

The Wall Street Journal as an update on the developer turned almond grower:

Greg Hostetler is a real-estate developer who builds subdivisions in California's Central Valley. But the past few years, he's gone nuts. To be precise, Mr. Hostetler has been building a sideline in almonds, spending $60 million to buy and plant 4,500 acres of trees since 2000. This year, he plans to shell out at least another $5 million to plant an additional 1,000 acres. "The almond market is looking a lot better than the housing market right now," he says.

Mr. Hostetler isn't the only newcomer jumping into California's almond game, where orchards now stretch down the Central Valley from Red Bluff in the north to Bakersfield in the south. In the past few years, doctors, lawyers, pension-fund managers and pro football Hall-of-Famers, among others, have all snapped up farmland in the state to plant almonds as world-wide demand for the nut has grown by 11% between 2001 and 2006. And despite some concerns on the horizon, many of the newer growers remain optimistic."

Everyone knows that almonds are a great investment," says Monterey, Calif., restaurateur Dominic Mercurio, who has teamed with football commentator John Madden to purchase nearly 400 acres of almond orchards, spending more than $3 million since they bought their first 25 acres in the late 1990s.

But many of the people jumping into almonds are doing so even as prices for the nut have been sliding...In a classic agricultural cycle, high crop prices resulted in a rush to plant trees, leading to a market glut of nuts...All of this has roused the ire of some longtime almond farmers, who say the newcomers are driving up land values and driving down nut prices.

Mr. Hostetler, the Central Valley real-estate developer who is now planting more almond orchards, says his $60 million investment in the nut so far is "a little better than break even," but he'll know more after this year's harvest ends next month.

Mr. Hostetler, who still spends three-quarters of his time in the property business, says he isn't worried about the huge quantity of almonds slated to fall from the trees this season, or the thousands of acres being planted with new trees this year. When he drives his pickup truck out between the dusty rows of trees, he says he sees nothing but bounty and profit on the horizon

Crisp property auctioned for a reasonable price

I think someone actually got a very good deal on this foreclosed property.

From Eyewitness News:

For the first time, once, high-profile Bakersfield Realtor David Crisp had one of his properties sold at auction.A four-bedroom, 2.75 bath home in the eighteen-hundred block of Grimshaw Street in the Seven Oaks Grand Island neighborhood sold at auction Tuesday for just over $700,000. The 3600 square foot property was in default for $899,000.

Meantime, his wife, Jennifer Crisp, had a defaulted property auctioned off Wednesday.Also in Grand Island, the four-bedroom property on Locksley Drive sold at a huge discount.More than $646,000 was owed on the property. The home sold for the bargain price of $324,000.

Valley Developers(speculators) abandoning projects

I recall a conversation I had, in August 2005, with the head of a local commercial real estate brokerage who claimed to me that these developers (speculators) who were paying $100,000 to $150,000 per acre for land (to build homes)were going to make out "big time" on this boom.

He claimed that "we had another 7-10 years more of this boom, before things leveled off." Turns out this guy was nothing more than a slick talking salesman who would say anything to make a commission.

Now the tide is going out and we get to see who is swimming naked.

From the Bakersfield Californian BY GRETCHEN WENNER:

A major housing development southwest of Bakersfield is dead, a victim of the wheezing housing market.

The Flying Seven Ranch was slated to put more than 9,000 homes and apartments south of Panama Lane on four square miles of farmland owned by the Destefani family. Flying Seven developers now say their project is kaput because of drooping demand.

That project's demise may also impact plans for the Gateway project of nearly 16,500 more units immediately to the south of Flying Seven. A gap created by Flying Seven's pullout could hobble Gateway's plans for annexation into Bakersfield.

"Things were going great guns," said Marc Gauthier, the city's principal planner, "then got slammed into neutral."

The following month, developers of the McAllister Ranch project on the north side of Panama Lane got a two-year extension for 274 homes on a 582-acre patch there.

The 6,000-home McAllister Ranch community is moving ahead, though at a slower pace than developer SunCal Cos. predicted two years ago. Then, it said residents might move in at the end of 2006. SunCal took over the long-dormant project in April 2005 after previous developers dropped out in 1993.

These days, a golf course designed by Greg Norman boasts tidy greens, but the rest of the 2,070-acre project rises not much higher than the curb-and-gutter stage.

Fresno Bee (hat tip Lander).

“A real estate mystery lingers in southeast Fresno: Why would a developer build two dozen houses, sell only two and then disappear?”

“Few cars visit this ghost tract south of Butler Avenue, known as Ashwood Park. Weeds choke many lots. The model home complex is closed. There are no real estate signs in the yards, and no phone numbers posted anywhere. Just placards in the windows that read ‘available.’”

“‘It’s very quiet and peaceful,’ said Pao Ly, one of two home buyers who moved in before the developer, Lafferty Homes of San Ramon, vanished in March. He suspects the surrounding houses eventually will sell for less than the $450,000 he paid for his 2,900-square-foot home, and would like to renegotiate the deal — if he can figure out who to call.”

“Experts say the developer likely turned the tract over to lenders because it couldn’t sell houses fast enough to cover debt payments — much as some troubled home buyers walk away from a house they cannot afford and cannot sell.”

“‘The odds are that there was a large loan on the land and the builder could not afford to carry the land,’ said Alan Nevin, economist for the California Building Industry Association.”

“Lafferty Homes may have priced the houses too high for the area, some real estate observers said.”