Arkansas Blog

Gotta love the Bankers...

Here us the link so you can copy and paste it.

http://online.wsj.com/article/SB123093614987850083.html

In this case, and many like it, ya gotta love the mortgage broker and the appraiser. The banker was a little farther up the food chain. I'd be inclined to argue that the appraiser and the mortgage broker in cases like this were very close to committing fraud. A hair's breadth away? No, closer still.

The situation is absolutely disgusting. Over the past few years I've bought a number of run down houses, rehabbed them, and I use them as good rental properties. Some are in areas that account for blue-collar rental such as Broadmoor, some are in Colony West, etc. All over.

I watched people who were totally unqualified for loans apply to buy houses. When the local banks (such as Arvest and Regions) had enough brains to turn down the loan, the people would go to an independent broaker. The broker then got his buddy the loan appraiser to twist numbers and produce whatever result the mortgage broker wanted. Then the loan was repackaged and sold to an out of state bank such as Countrywide. And we all know the terms involved... ARMs, resets, neg amortization, etc. Two years later, the homeowner is screwed when the ARMs reset.

The fraud also extended to the buyers... from personal knowledge of my tenants who went on to buy houses, at least 25% lied about their income on the loan app. Yep, they claimed to be making $60k when they only made $35k. They couldn't afford the house, but the TV shows had convinced them there were vast riches to be made by flipping their house. So they lied outright... committed mortgage fraud...

And of course, we have the mortgage brokers... many of them only worried as far as pocketing their origination fee. They winked and nudged the buyers into loans that were bad... a higher interest rate or an ARM meant a better cut for the broker. The interest rate spread didn't have to be disclosed.

And you have the tiny percentage who are real investors like me... putting 20% down, making sure the property will cash flow. I love to buy run down houses (at a discount of course) and through hard work bring them back to life. I dont just write checks to contractors... I have passion for what I do.

I'm very selective (within the law) regarding my tenants. I know a lot of "investors" who will put in any warm body that can pay the security deposit and 1st month's rent. These "investors" (slumlords) won't repair a thing, and don't worry about the tenant's new boyfriend (who deals crack) or the tenant's sister (prostitute.) As long as the rent comes in, they let the house fall down.

I take care of my houses, and I have tight screening criteria. In my Broadmoor houses I look for solid, working-class families. In WLR I look for professionals. I don't care a whit about race, religion, sexual orientation... I care about their criminal history (if any), whether they smoke (my houses are smoke-free) and whether they are good, honest people. My grandfather taught me that "good, honest people" transcend race, religion, creed, etc.

When something breaks, I don't look to find blame, I GET IT FIXED. I believe the tenant is paying for the privledge of living in a good house... and they deserve a good house.

But now, what's happening? Thanks to the mortgage mess, loans have dried up. And now some jackasses in Freddie Mac and Fannie Mae have decided that small investors are a potential risk... there is a 4 loan limit on conventional mortgages. So even though I have a 750 FICO, I can put 20% down, I have $50k in the bank as cash reserves... I can't get a loan. I have "too many" mortgages, so I'm a "high risk." (I have to go to portfolio loans which are at higher interest and more restrictive terms.)

BUT... FHA has lowered it's minimum FICO to 620 in order to get first-time homeowners. A 620 is barely above bankruptcy... the same people who only qualified for sub-prime (and defaulted on them) are the only people who can get loans. FHA says this is to "help" the homeowner.

As my kids say... WTF? What happens when these new FHA loans default in two years? Will the government come up with ANOTHER bailout plan?

I work 60 hours a week... I invested hundreds of thousands of my own dollars... I see foreclosure after foreclosure that I could buy and keep up the neighborhood. But the government has stacked the deck against me.

When do I get a bailout?

I propose we take some of that Hank Paulson bailout boodle and build a big-ass -- I mean BIG-ass -- prison in North Dakota and put every serpent who participated in the mortgage scam behind bars. From the criminal "appraisers" to the real estate sales people who conspired to get mortgages for people by helping borrowers lie on their loan applications, to the mortgage brokers, to the bank boodlers who knew they were dealing in fraudulent paper, to the Wall Street jackals who created the "financial instruments" to enable to fraud. Put Bernie Madoff in there too. And the hedge fund sharpies who helped perpetrate the scam.

Oh, and the federal "regulators" who wink-winked to enable the thieves.

Oh, what the hell, put Cheney in there too.