Six Months Later: Open House Picks 6/22/07

an interesting comment from june:

"258 Lincoln is still on the market--I have an appointment to see it this weekend. And the realtor with Corcoran called to tell me that the 3 story brick on Midwood I saw a few months ago asking 1.2M is now asking 999K. And the BHS realtor with the 2 story on Midwood asking 899K--the exact same house as this one on Lincoln but not renovated--has called to see if I'm interested. I saw it over a month ago--if I were interested I would have called her! While I know better than to second guess the market, Lefferts Manor is still very much a buyer's market. And this Lincoln Road listing is about 150K over-priced."

Posted by: guest at December 20, 2007 12:54 PM

We should be looking at things that first came to market after the credit crunch, not this BS.

Posted by: guest at December 20, 2007 1:01 PM

On the Lefferts house, the first comment is incorrect.
There have been several way above this, notably for four-story homes on Rutland and Midwood.
Don't know what 12:54's point is exactly, but the commenter in June had no idea what they were talking about.
This one sold at asking along with the smaller one on Midwood. 146 Rutland went for way over asking.

Posted by: guest at December 20, 2007 1:05 PM

Well, the "credit crunch" was fully underway already in late Summer and Fall 2007, 1:01, so the Lincoln Rd house does fit your request.

That's a great price for the Lincoln Rd house in Lefferts Manor. The buyer should be happy. It's a lovely house for that money, and in better shape than the one on Maple that Century 21 is trying to get $1.3 for, which needs new kitchen and bathrooms and new paint job throughout if not more. So the Lincoln Rd price is a good sale for the seller, and yet still is a good investment for the buyer. It's "win win". Some of the 2-story houses in LM that have been fully renovated with high-end fixtures could certainly command $1.3, but those houses aren't and won't likely be for sale anytime soon, as they are owned by newer younger homeowners. Nobody is selling but the older, longtime homeowners who are getting ready to retire and their houses need work. So the comps based on those sales are lower.

Posted by: guest at December 20, 2007 1:09 PM

Marlborough Road, despite it's PPS location, has lost much of its period detail, both inside and out. Needs updating and new mechanicals.

That said, the backyard is great and it is PPS. Someone who wants to gut the interior and do a very spacious, open plan, modern style home, would be happy here, although that's not why most people come to Ditmas.

Posted by: guest at December 20, 2007 1:09 PM

1:05....my point was that the comment i found indicates how little posters on here know what the heck they are talking about.

it was not 150K overpriced as he/she said. it sold for asking. DURING the credit crisis, no less.

so every time you see a comment on here, you need to take it with a grain of salt.

that was my point.

Posted by: guest at December 20, 2007 1:12 PM

Gutting an older, woodframe house and putting in an open, airy modern interior would be really cool, 1:09 and some people would gladly do that. It's a good solution for the tiny rooms of these particular layouts. Problem is the prices in Ditmas have inflated beyond it making sense to do such an expensive, huge renovation like that. It could be as much as a million dollars to do that and this house is not worth over $2 million.

Posted by: guest at December 20, 2007 1:18 PM

If these properties closed in early November, then they were very likely in contract before the credit crunch hit in late August. So, when we see things that were on the market in October, and close in January, then we will have a better idea of the effect of the summer's credit crunch, and the trend in prices.

Posted by: guest at December 20, 2007 1:22 PM

whiners.

PLG house that sold for more than a park slope house and did not require a reduction in price or a buyer who paid less than asking.

Eat it, park slope.

Posted by: guest at December 20, 2007 1:26 PM

"so every time you see a comment on here, you need to take it with a grain of salt."

Please pass the salt.

Posted by: guest at December 20, 2007 1:28 PM

PLG'ers love Park Slopers. Lots of people in Lefferts Manor came from Park Slope.

Posted by: guest at December 20, 2007 1:29 PM

the plg house was way nicer and bigger than the park slope house.

you really aren't comparing even remotely the same things here.

ignorance is bliss, i suppose.

Posted by: guest at December 20, 2007 1:30 PM

1:28 = person who said plg house was 150K overpriced back in june.

Posted by: guest at December 20, 2007 1:31 PM

"1:28 = person who said plg house was 150K overpriced back in june."

Still needs more salt.

Posted by: guest at December 20, 2007 1:36 PM

where is the what?

Dec. 19 (Bloomberg) -- Morgan Stanley increased its bonus pool 18 percent to almost $10 billion following the firm's first-ever quarterly loss, saying employees in divisions that reported record results in 2007 deserved the awards.

Total compensation, including salaries, benefits and bonuses, climbed to $16.55 billion in 2007 from $13.99 billion last year, the New York-based firm said today in a statement. Year-end bonuses, estimated at about 60 percent of the total, will jump to $9.93 billion from $8.39 billion.

``We felt it was inappropriate, as our board of directors did as well, for employees who delivered sterling results and a very strong performance to suffer,'' Chief Financial Officer Colm Kelleher said in an interview today. ``If you were to normalize our business and take out this $9.4 billion charge, you would see that we had a record year across the whole enterprise.''

Morgan Stanley employed 48,256 people on Nov. 30, up 12 percent from 43,124 a year earlier. Average pay per employee climbed to $343,004 from $324,320 a year earlier, with the bonus portion increasing to an estimated $205,802 from $194,592.

Goldman's Payout

Morgan Stanley is the third Wall Street firm to report higher compensation this year. Goldman Sachs Group Inc., the biggest and most-profitable company in the industry, yesterday reported that the figure climbed 23 percent, with average pay rising to $661,490. Lehman Brothers Holdings Inc., the fourth- biggest firm, said its compensation pool increased 9.5 percent from a year earlier, with average pay dropping 0.5 percent to $332,470.

Posted by: guest at December 20, 2007 1:38 PM

The last 6 months were not the next 6 months - economic forecasts have grown decidedly gloomier as the full impact of the subprime meltdown is at last emerging. Price cuts are starting to happen at last in NYC (we've all seen them here!) and I think many buyers are sitting tight waiting to see what 2008 - and the next few years - will bring. Let's see how the open house picks stack up 6 months from now - or better yet, a year from now... Re: Hungtington Street - Last ask does not mean closing price: while it will be interesting to see where it did close, I still think that closing price reflects a different market than where we are now and in the near to mid-term (or longer term?) future...

Posted by: guest at December 20, 2007 1:40 PM

Guest at 1:18... Yes, this house would be in the 1.7 or 1.8 bracket if gut reno'd... But this is PPS and that's what homes in this neighborhood and landmarked DP are selling for if they are in such pristing condition.

So, I disagree that the market is overly inflated. I bet the owner would take 1.1 for this house as is. Throw another 600k into it and you've got a fantastic house that is, amazingly enough, in the same price bracket as recent comps for larger houses in top condition. Check the MGK website for examples.

Posted by: guest at December 20, 2007 1:41 PM

1:40. please see 1:38.

the world is not ending.

real estate in nyc is still doing great.

ask some people in the biz. it's back to normal-ish. not off the charts like the past 7 years, but still way above pre-2000 levels.

everything's gonna be ok. breath deeply.

Posted by: guest at December 20, 2007 1:42 PM

1:29: everyone in America once lived in park slope. In fact, before ellis island, everyone who came to America came through park slope. park slope is the center of the universe and the people who live there truly believe they are the chosen ones.

You can compare these two, 1:30, as the Park Slope house should have gone for more - based on the comments of the idiots on this blog who think Park Slope is such a wonderful place to live and everywhere else is an afterthought.

Eat it, park slope.

This new feature of brownstoner is great because it points out how stupid you "experts" are at pricing a house and how little you know about the market outside the bubble you live in.

Posted by: guest at December 20, 2007 1:44 PM

1:41, but it's $600,000 just for the renovation (which would be a tight budget if you are talking about completely changing layout inside) PLUS carrying costs for several months to a year PLUS rent on a place to live. The big gut renovations get close to $1 million because of that.

Curious, do NYC laws prohibit parking a doublewide trailer on a freestanding home's yard and living there while doing renovations? That would be awesome.

Posted by: guest at December 20, 2007 1:47 PM

My view, and I am not a real estate professional, is that sales hit a wall around mid-July. There has been significantly less activity in the last half of the year than in the first half.
In my large complex, sales stopped cold in late July after being very brisk for about three years.
All that could change next year, but right now I see doldrums. Not gloom and doom but doldrums.

Posted by: guest at December 20, 2007 1:48 PM

your "large complex" sucks then.

cause from where i'm at, doldrums is far from what i'm experiencing.

if i'm not mistaken, november was one of the best novembers on record.

maybe you need some new marketing??

Posted by: guest at December 20, 2007 1:50 PM

"Park Slope is such a wonderful place to live"

The one thing you said I agree with, 1:44.

Posted by: guest at December 20, 2007 1:52 PM

I don't get your point, 1:44. Except that you hate Park Slopers and PLG'ers and anybody who owns and not rents.

Posted by: guest at December 20, 2007 1:52 PM

I think he/she just "hates" period.

Sounds like a very pleasant person that 1:44.

Posted by: guest at December 20, 2007 1:54 PM

1:38 Read this asshat
Bear Stearns cut 1,400 jobs in fourth quarter, CFO says

http://www.marketwatch.com/news/story/bear-stearns-cut-1400-jobs/story.aspx?guid=%7B75AE6F35%2D9BFA%2D4A5D%2D9986%2DB10CBF1D442F%7D
Plus plenty of people LOST their jobs this week, I know some of them. These was the same people telling me Wall Street, Real Estate and Blah Blah. They are fucked for the holiday season.

The houses listed will be future foreclosures. They (buyers) was the last suckers on this ponzi scheme.

BTW Wall Street Big Boys are getting out now. You (the suckers) will be holding the bag in the new year. That's why some are getting bonuses now, it's their golden parachute.

brooklylove stop trying to be like 'The What'. Get your own persona .

The What

Someday this war is gonna end...

Posted by: guest at December 20, 2007 2:00 PM

Not exactly related to the above-houses, but definitely in the same spirit:

Anyone remember 344 Carlton Avenue, listed with Corcoran for $2.5 over the summer? Lots of brokers said there was a major bidding war, and that the price had just broken the $3 million mark as a result. Well, it recently closed for $20K under asking (see public records). Brokers lie, lie, lie even more than I thought.

http://tinyurl.com/24zfx6

Posted by: guest at December 20, 2007 2:07 PM

wow. 2.48 million is a HUGE price for 344 Carlton.

Wow.

3 million or not, that is impressive.

GO Corcoran.

Posted by: guest at December 20, 2007 2:13 PM

as usual, the what, you didn't even READ post at 1:38.

you choose to focus on minor news.

Posted by: guest at December 20, 2007 2:16 PM

I mean Brooklynnative

The What

Someday this war is gonna end....

Posted by: guest at December 20, 2007 2:23 PM

Re: Marlborough. A lot of the interior walls are already down on the ground floor.

Exterior of the house has been modified, but in good condition. Shingled. Paint is good condition.

Posted by: guest at December 20, 2007 3:41 PM

Ewww I can't believe Corcoran lied about a biding war to try to inflate the price. And then try to play down the fact that they lied and congratulate themselves for a job well done.

Posted by: guest at December 20, 2007 5:04 PM

i think the market is going to pick up some serious steam come spring.

a lot of people having been waiting on the sidelines hoping for a bargain that doesn't seem to be materializing.

the people i know looking to buy are now getting nervous that once again they have missed bottom and are starting to think they better jump in again and start looking more seriously.

i've heard this from a number of people.

Posted by: guest at December 20, 2007 5:11 PM

Did you read the Times today. Nobody on Wall Street is getting a bonus. The real estate market will be nothing like last year.

Posted by: guest at December 20, 2007 5:19 PM

Completely WRONG, 5:19.

Please read 1:38.

Posted by: guest at December 20, 2007 5:25 PM

Morgan Stanley is the third Wall Street firm to report HIGHER compensation this year. Goldman Sachs Group Inc., the biggest and most-profitable company in the industry, yesterday reported that the figure climbed 23 percent, with average pay rising to $661,490. Lehman Brothers Holdings Inc., the fourth- biggest firm, said its compensation pool increased 9.5 percent from a year earlier, with average pay dropping 0.5 percent to $332,470.

Posted by: guest at December 20, 2007 5:26 PM

"i think the market is going to pick up some serious steam come spring.

a lot of people having been waiting on the sidelines hoping for a bargain that doesn't seem to be materializing.

the people i know looking to buy are now getting nervous that once again they have missed bottom and are starting to think they better jump in again and start looking more seriously.

i've heard this from a number of people."

Yours truly,
broker desperate to meet Q108 quota after missing Q407

Posted by: guest at December 20, 2007 5:26 PM

Yours truly,
broker desperate to meet Q108 quota after missing Q407

P.S. i'm a bitter renter who still thinks brownstones will be 200K in park slope in 2008.

Posted by: guest at December 20, 2007 5:28 PM

I heard about the alleged Carlton Avenue bidding war at two different open houses I attended in Ft Greene in the summer. It seems the rumors started with Corcoran and then spread to all the other brokers involved with Ft Greene listings. At one open house I was at, the broker (not from Corcoran) told a group of us that the Carlton house had just gone into contract for over $3 million, "way, way over asking". His intimation was that we should bid high for his listing, because even an offer at-asking would be too low, since "Carlton had set the new standard."

Posted by: guest at December 20, 2007 5:36 PM

who cares, 5:36?

seriously.

i mean who the eff cares.

so don't use corcoran if you're so offended.

Posted by: guest at December 20, 2007 5:39 PM

5:39=effing broker.

Posted by: guest at December 20, 2007 5:45 PM

I think there other people who might care. I think it is good for people to know that some brokers will do what ever it takes to close the deal at the highest price.

Posted by: guest at December 20, 2007 5:55 PM

Hey 5:39--you sound way too angry to be an uninterested third party. What's your problem? See, I'm not offended. It's business, you can't get offended. I'm simply shocked at the level of bullshit that goes on, between brokers of different firms even, in attempts to pump up their own listings comparing it to a PHANTOM sale. Truly eye-opening.

Posted by: guest at December 20, 2007 5:56 PM

Buyers should be interested. It's a cautionary tale.

Posted by: guest at December 20, 2007 6:01 PM

"i think the market is going to pick up some serious steam come spring."

HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA HA !

Posted by: guest at December 20, 2007 6:13 PM

I hate the holidays.

Posted by: guest at December 20, 2007 6:16 PM

I am a "Wall Streeter" from one of the above named firms. I have been following these boards for a while and I will tell you I am definately getting a NICE Bonus, and I am definately grabbing a property (or 2), in some prime spots in '08.

This board seems to have degenerated to a similar tone as you would find in a stock chat room. Lots of people glooming and dooming who are really shorting the market and spreading fear - "The What" comes to mind.

Once the negativity reaches a fever pitch - Time to buy! The suckers are cleared out and the market is wound up like a spring, ready to bounce back!

Cant wait to own a nice piece of Brooklyn in '08

Sincerely,

A Wise Young Trader

P.S. - Someday(soon)I'll be the What's Landlord

Posted by: guest at December 20, 2007 7:01 PM

I LOVE you, 7:01.

And thank you for some much needed reality on here.

My coworker told me today that her husband who works on Wall Street was informed this week of his bonus...it will in fact be 75k MORE than last year....I believe it will be in the neighborhood of 600k. They have already started looking at places in Park Slope.

The doom and gloomers are not just this way on this board.

That is probably how they live their lives as well. It's sad, but those who keep a positive attitude and look towards the future know that buying property in one of the best cities in the world will be a good investment in the long run.

Period.

Posted by: guest at December 20, 2007 7:26 PM

"Sincerely,

A Wise Young Trader <--- That will be unemployed in 2008.

P.S. - Someday(soon)I'll be the What's Landlord"

The Daily News

The What assaults asshole landlord. Beats him in his fucking head with a baseball bat!

The What

Someday this war is gonna end....

Posted by: guest at December 20, 2007 7:38 PM

Good One "The What", But there will always be work for bright, talented, and savvy business people. Not sure I could say the same about washed-up, bitter, medicated brokers...

Also, not sure the daily news would print such a offensive headline, but I promise when I am your landlord, I will not be an asshole to you at all. I will even let you skate on your rent to pay for your meds once in a while - As long as you promise to take out the trash and do some minor cleaning around the building for me.

A Wise Young Trader

PS - The War is over, you lost.

Posted by: guest at December 20, 2007 7:56 PM

"That will be unemployed in 2008"

Real talk. Not that it's funny though.

Posted by: guest at December 20, 2007 7:57 PM

Hi Everyone! Thought I would check what is going on this webpage since I have been out of contact for some time.

I would say to A Wise Young Trader that you will probably not be Mr. What's landlord because, apparently, Mr. What owns his own home.

As I have stressed before when the discussion degenerates into an argument over the temperature of the economy and what people working in the financial will receive as bonuses this year--I have stressed--that we should keep in mind that there has been a change in the perception of downtown Brooklyn and a change in the demographics in the US. Boomers and their children are more interested than ever (in my lifetime) of moving into the urban center. They have a much different outlook than our parents may have had. Many people I speak with feel they have "discovered" Brooklyn in their 50’s.

As long as New York is a city where people want a pied-a-terre or feel their kids might as well live, I feel we will continue to have a relatively stable environment in brownstone Brooklyn...barring a sudden collapse of the Manhattan real estate market.

And even then, downtown Brooklyn will probably not become a wasteland because many people may continue to want to live in calmer landmarked Brooklyn instead of hi-rise Manhattan.

The very wealthy and the flashy can afford/may want to live in townhouse Manhattan on the Upper Eastside. I for one, as I have mentioned in the past, have found that some very wealthy people are not choosing to live in the priciest, flashiest Manhattan locations. There is a lot of variety out there.

I feel that people with good money may be the ones moving into or buying homes for their children in landmarked Brooklyn, that it is not exclusively a story about what people can afford to buy based on what loan they can qualify for based on what salary and bonus they may or may not receive.

Season’s Greetings,
TheGrammarLady

PS I know the house that sold for $2.48 million. We toyed with the idea of buying it after looking at it a long time ago but it was an SOR (lived in as a two family) with a mean tenant occupying three floors. Apparently, it got ugly, a court case ensued (tenant did not win), a suspicious fire burned the top floor and the house got water damage. I guess the first owner after the repairs were done paid about 400K for the house. I think it went for 1.2 after that and now 2.48. I happened to pass the house during one of the many open houses this past summer. Two gals were coming out and commenting on the asking price being ridiculous because the ironwork was corroded and missing a little piece (not original ironwork...the house, unfortunately, has wrought iron railings that look to be of a 1960 vintage unlike many of the other houses along that side of the street which retain their original cast ironwork). I don’t think they were really interested in Fort Greene to begin with! Oh, well!

Posted by: guest at December 20, 2007 8:07 PM

So-Called "The What" and So-Called "Wisecracking Young Trader", please let's have some decorum! There is no need to use this kind of language on the one hand or be so denegrating on the other. This argument is in very poor taste.

TGL

Posted by: guest at December 20, 2007 8:11 PM

TGL, I think Wise Young Trader is right on target. The What is the most denegrating guy on this board - I suppose you havent been called an asshat or fucktard lately?

Every argument on this board is in poor taste.

Posted by: guest at December 20, 2007 8:23 PM

7:26 you are very lame. So lame.

Posted by: guest at December 20, 2007 8:36 PM

I think real estate is the dirtiest, most lying, inhumane, scummiest business around.
Brokers are lying weasels. You need to arm yourself with that knowledge before venturing forth, Nothing....nothing....from the lips of a broker is to be believed.
In fact being a congenital compulsive liar is the best possible qualification for becoming a) a car salesman and b) a real estate broker. You have to want to be slime.

Posted by: guest at December 20, 2007 9:13 PM

I am a broker with a firm other than Corcoran. I work a lot in FG. I never heard rumors of a bidding war for the house on Carlton. Perhaps folks on this board are mixing it up with the house on S. Portland which did have a bidding war. btw, I'm not the broker for that house either. But I think it's lame that people go on here and blast brokers as a category. And way too easy. Should we blast buyers as jerks just because some are? Or people who come to open houses and just prowl around to see what the neighbors' place is listed for? Who cares?

Posted by: guest at December 20, 2007 9:51 PM

Re: gloom & doom vs. market's gonna pick up lots of steam: I think there's a middle position. I'm an owner, (no bitter renter here) and have been watching the market very carefully for the last 7 years as I hope to buy more space. I don't think the market will crash - for reasons bandied about here (demographics, NYC desirability, etc.) but I also think it will soften in the not too distant future. Will you lose out in the long run if you buy high? Probably not, but people who bought in 1993-95 were much better off than people who bought in 1988-89 when prices, like now, had reached unsustainable highs and then dropped. I'm amazed at how some of the "market's gonna pick up" types act as if RE is some inexorably rising machine, and seem to have total amnesia about historical corrections in NYC. The RE can go down significantly, and for a while - in the long run, yes, it will pick back up and perhaps even roar again (though will it ever roar to the same degree as the last decade, the great RE bull market?) but who knows when that will be - also don't forget that, corrected for inflation, RE is not always the "golden" investment it's hyped to be (and hence, you should really be thinking of it as a home, unless you're an investor). I don't think the market has bottomed out at all - and why should NYC be immune to the problems plaguing the rest of the country, and even other parts of the world? I'm betting my money on waiting a bit - no I don't expect to snag a PS brownstone for 200K (that's just silly) or even 900K - but I also think more reasonable prices are coming our way. Let the Wall Streeters pay top dollar for their mini-palaces, but more earthbound folks like us would be happy to have a 2000 sf townhouse and those more modest houses are coming down...

Posted by: guest at December 20, 2007 11:07 PM

"Perhaps folks on this board are mixing it up with the house on S. Portland which did have a bidding war."

Nope, not at all. NO mix up whatsoever.

And please, stop whining. Those open house gawkers you complain about provide you with valuable and visible foot traffic that only helps your sales.

Posted by: guest at December 20, 2007 11:39 PM

I just noticed something about The What's posts. Took me a while but hey. Sometimes the ellipsis after "Someday this war is gonna end" contains two dots, sometimes three, and I think I caught four once too. If it were your tagline, and you weren't much of a typist, wouldn't you paste stored text? I'm suspecting imposters. What say, Mr. B? Can you track the ISP addresses and report back: one or many? Though I have little in common with our correspondent as he presents himself, I'm thinking of doing an impersonation myself, just to see. Dozens of us are equal to the task.

Posted by: guest at December 21, 2007 12:54 AM

"I just noticed something about The What's posts. Took me a while but hey. Sometimes the ellipsis after "Someday this war is gonna end" contains two dots, sometimes three, and I think I caught four once too."

Wow! I thought I had to much time on my hands. Get a fucking life.

Brothers and Sisters the end is here. I know I know I alway say that but, it's here. I would like to see all the asshats that say "it's different here" or "real estate always goes up" and the big one "New York is different". You are going to have your asses handed to you on a silver platter. The foreigners will not help America. They fucking hate us and want to see us crash. Look at the world's major banks they are have big time problems. America has sold shit to the world and sad to say in the new year will be bad.

The What

Fuck all of you ( I really mean that)

Posted by: guest at December 21, 2007 1:21 AM

Here you mother fucking asshole read this shit wrap your mind round this The What

Fraud Seen as a Driver
In Wave of Foreclosures
Atlanta Ring Scams
Bear Stearns, Getting
$6.8 Million in Loans
By MICHAEL CORKERY
December 21, 2007; Page A1
ATLANTA -- Skyrocketing foreclosures are a testament to how easy it was to borrow from mortgage lenders in recent years.

It may also have been easy to steal from them, to judge from a multimillion-dollar fraud scheme that federal prosecutors unraveled here in Atlanta. The criminals obtained $6.8 million in mortgages from Bear Stearns Cos., including a $1.8 million mortgage to Calvin Wright, a New Yorker who told the investment bank that he and his wife earned more than $50,000 a month as the top officers of a marketing firm. Mr. Wright submitted statements showing assets of $3 million, a federal indictment alleged.

In fact, Mr. Wright was a phone technician earning only $105,000 a year, with assets of only $35,000, and his wife was a homemaker. The palm-tree-lined mansion they purchased with Bear Stearns's $1.8 million recently sold out of foreclosure for just $1.1 million. Bear Stearns, meanwhile, posted the first quarterly loss in its 84-year history as it wrote down $1.9 billion of mortgage assets yesterday. (See related article.)

Fraud goes a long way toward explaining why mortgage defaults and foreclosures are rocking financial institutions, Wall Street and the economy. The Federal Bureau of Investigation says the share of its white-collar agents and analysts devoted to prosecuting mortgage fraud has risen to 28%, up from 7% in 2003. Suspicious Activity Reports, which many lenders are required to file with the Treasury Department's Financial Crimes Enforcement Network when they suspect fraud, shot up nearly 700% between 2000 and 2006.

In 2006, losses from fraud could total a record $4.5 billion, a 100% increase from the previous year, says Arthur Prieston, chairman of the Prieston Group, which provides lenders with mortgage-fraud insurance and training. The surge ranges from one-off cases of fudging and fibbing to organized criminal rings. The FBI says its active mortgage-fraud cases have increased to 1,210 this year from 436 in 2003. In some regions, fraud may account for half of all foreclosures. "We've created a culture where a great many people know how to take advantage of the system," says Mr. Prieston.

Yet the system itself bears blame. The evolution of mortgages into a securities instrument turned loan origination into a competition. Caution gave way to a push for speed and volume. Embroiled in an all-out war for market share, issuers reduced barriers to credit, for example, by offering so-called "stated-income" loans, which require no proof of income. "The stated-income loan deserves the nickname used by many in the industry, the 'liar's loan,' " says the Mortgage Asset Research Institute, which works with lenders to prevent fraud. A recent review of a sampling of about 100 stated-income loans revealed that almost 60% of the stated amounts were exaggerated by more than 50%, MARI says.

It didn't take a rocket scientist to steal a fortune from mortgage lenders in recent years. That much is clear from the Atlanta scheme. It was perpetrated in large part by a 23-year-old college dropout named Gregory Jerome Wings Jr., aka G-Money. His accomplices included a young nightclub owner, along with the director of an underground documentary called "Crackheads Gone Wild," a cautionary tale about drug addiction.

Their scam was garden variety: recruit borrowers with good credit to apply for gigantic loans, often of the stated-income variety, using false income and asset statements. Find a mortgage broker willing to submit false information, and find appraisers who will approve inflated values. The perpetrators line their pockets with the proceeds, using some as down payments or for future renovations. Some buyers diverted proceeds to themselves through shell companies.

The brazenness of the scheme is illustrated by the case of Mr. Wright, the New York telephone worker who posed as a highly paid executive to obtain a $1.8 million mortgage from Bear Stearns. Recruited into the scheme by an acquaintance in Atlanta, Mr. Wright, with the help of ring leaders, diverted hundreds of thousands of dollars from that Bear Stearns mortgage to himself, to Mr. Wings and to others in the scheme, according to a federal indictment.

In the very same week, Mr. Wright obtained a $1.9 million mortgage on a second value-inflated mansion near Atlanta, this time from BankFirst, a unit of Minneapolis-based Marshall BankFirst Corp. This deal also brought enormous spoils to Mr. Wright, Mr. Wings and other accomplices.

"It was so easy, it's incredible," says Akil Secret, attorney for Mr. Wright, who has pleaded guilty to bank fraud and is awaiting sentencing.

'Seemed Clean and OK'

As profits from the scheme fattened their wallets, these young men became the envy of their peers, especially since their actions involved none of the dangers of street crime. "You see a guy who is 23 and he's driving a fancy car. You go into clubs and everyone seems to know him, and you kind of want to be like him," says defense attorney Rickey Richardson, explaining how his client, Daryl Smith, got involved in the scheme. "This wasn't drugs. This wasn't guns. This seemed clean and OK."

Residents of some fancy Atlanta suburbs spotted the scheme. They became suspicious when new homes in their neighborhoods sold for sky-high prices, then remained vacant. After the same individual bought several such homes in one ritzy development, neighbors alerted authorities. One homeowner who helped expose the fraud and other schemes in his neighborhood now carries a loaded handgun in his truck. "This is serious stuff," he says. "We are putting people in prison for many, many years."

Since federal authorities issued an indictment in April 2006, Mr. Wings, Mr. Smith, Mr. Wright and about 10 others have pleaded guilty to various counts, including bank fraud, and are awaiting sentencing. Another ringleader was convicted in federal court last month. Their sentences could be lengthy: In an unrelated case, an Atlanta attorney with no prior criminal record was sentenced in August 2005 to 30 years in federal prison on a mortgage-fraud conviction. Mr. Wings declined to comment for this story, as did Messrs. Wright and Smith.

In the wake of their downfall, debate has been intense about how such an unaccomplished group could defraud top-tier financial institutions out of millions.

Prosecutors call the scheme sophisticated, noting its reliance upon forged and falsified documentation.

Lenders agree. Bear Stearns says the scheme evaded its antifraud efforts by supplying false information at every step of the application process. "We as an industry cannot eliminate fraud entirely," Tom Marano, head of mortgages and asset-backed securities for Bear Sterns, said in a statement about the Atlanta ring. "We can and do continue to develop systems and detection techniques that evolve with the complexity of criminal schemes.'"

But others contend that the Atlanta case illustrates the recklessness with which lenders were issuing mortgages in recent years. "This case should have been an indictment of the mortgage industry," says Patrick Deering, an Atlanta defense attorney involved in the case.

In an eye-opening setback for prosecutors, Mr. Deering and other defense attorneys successfully defended three home builders against charges that they had participated in the scheme. Prosecutors had attacked the home builders for failing to raise red flags when they witnessed mortgages being issued far in excess of what the builders were being paid.

On the Offensive

But some defense attorneys went on the offensive and attacked lenders for failing to guard against fraud. Particularly illuminating was the testimony of Lucy Lynch, a former vice president of mortgage operations at BankFirst.

"Fraud was not really a consideration in our world," Ms. Lynch testified, according to a trial transcript.

Ms. Lynch said the bank relied on an outside "loan officer" at a reputable mortgage broker to serve as its "eyes and ears" in the real-estate transactions. As it turned out, that person was indicted as part of the fraud ring. Ms. Lynch stressed that the bank took measures such as running all loan applications through a software program designed to detect fraud. "And things that didn't seem quite right, an underwriter could quickly pick those things out," Ms. Lynch said, according to a trial transcript. "So as far as having an actual policy or procedure around fraud, we didn't think it was necessary, quite frankly."

A total of $4.9 million in loans from BankFirst were used by the Atlanta fraud ring. In some cases, the bank gave its blessing to closing documents that showed unexplained payments of hundreds of thousands of dollars to obscure companies that turned out to be owned by the fraudsters. On three different Atlanta-area homes over a three-month period starting in late 2005, closing documents approved by BankFirst showed large payouts to the same companies.

Ms. Lynch said the bank assumed that the cash was going to subcontractors for construction work. But the bank never asked for invoices. In an interview, Ms. Lynch says the bank was primarily checking to make sure the borrower wasn't being charged any additional fees or debt. "We didn't do anything different from the rest of the industry,'' she said, adding that she believes her testimony helped convict three perpetrators of the fraud -- two borrowers and a real-estate agent who helped lead the ring.

Asked in court why the pattern of payouts didn't raise any red flags, Ms. Lynch responded: "Do you have any idea how many loans came into BankFirst during that time period?" She said BankFirst typically allowed a "15-minute window" from the time it received closing documents by fax to the time it released the loan proceeds to the borrower.

Ultimately, prosecutors failed to convict any of the three home builders. Charges against one were dropped. Another was the subject of a mistrial. And the third was acquitted before the case went to the jury. "These were the wrong people on trial," says Mr. Deering, whose client, home builder Randall Tharp, was acquitted.

One of the biggest losers in the Atlanta scheme was Bear Stearns. A total of $6.8 million in Bear Stearns loans were used by the enterprise. The fourth-largest mortgage that Bear Stearns originated in 2006 went to a borrower in the Atlanta scheme. That involved a mansion on which Bear Stearns lent nearly $3 million. Today, that mansion is in foreclosure and listed at $1.75 million.

Bear Stearns says falsified income and asset documents are difficult to detect "if they are part of a sophisticated fraud ring." In the case of the $1.8 million loan that Bear Stearns issued to Mr. Wright, the New York telephone worker, the company says it verified Mr. Wright's employment and assets.

But Mr. Wright's attorney, Mr. Secret, says, "Bear Stearns certainly couldn't have verified any of the assets or any of the money. It simply wasn't there."

A relative newcomer to the mortgage-origination business, Bear Stearns in 2005 created Bear Stearns Residential Mortgage to focus on "Alt-A" mortgages, a category between prime and subprime loans. Bear says its Alt-A loans included stated-income mortgages that required verification of assets.

During its first full year of business in 2006, Bear Stearns Residential Mortgage originated 19,715 mortgages for a combined $4.37 billion, according to data compiled by the Federal Reserve and analyzed by The Wall Street Journal.

Bear Stearns Residential Mortgage rejected about 13% of applications, compared with an average denial rate of 29% nationally, according to the Fed data. Bear Stearns says that it had a lower denial rate because all of its applicants had already been screened through its "on line pre-qualifying" site before they submitted a formal application.

Since the scheme, Bear Stearns says it has enhanced its monitoring of payouts listed on closing statements. BankFirst stopped issuing residential mortgages altogether, citing the declining market.

Some banks victimized by the Atlanta ring say they depended in part on a party called the closing attorney to protect their interests. But often, lenders neither choose nor pay for the closing attorney: The buyer does. In this case, the closing attorney was part of the fraud ring. The 58-year-old lawyer, Raymond Costanzo Jr., known in the ring as "Uncle Joe," signed off on several fraudulent sales, and collected $250,000 from the scheme, the indictment alleges. In 2006, Mr. Costanzo pleaded guilty to bank fraud and is awaiting sentencing.

Of course, the Atlanta scheme wouldn't have worked if not for appraisers willing to approve values far in excess of what builders were charging for new homes. Indeed, Bear Stearns and BankFirst say they ordered multiple appraisals of the homes they financed. Yet no evidence has emerged of appraisers receiving kickbacks. And no appraisers got indicted.

Artificially Raised Values

In some neighborhoods, the fraud scheme itself may have artificially raised values. Another explanation is that the appraisal market is fiercely competitive. Experts say some appraisers may offer inflated values in exchange for their standard fee of several hundred dollars -- a strategy that can win business without exposing an appraiser to charges of fraud. "Appraisers get sucked into these schemes because they are starving for work and many of them don't know what the heck they are doing," says Carl Heckman, co-founder of the Georgia Real Estate Fraud Prevention and Awareness Coalition, composed of appraisers, lenders, mortgage brokers and residents.

In the neighborhoods where the Atlanta scheme operated, values have plummeted. Many homes associated with the scheme are now in foreclosure. Some have sold for as low as 50% of what buyers in the fraud ring paid. "The banks are getting more and more aggressive in their pricing because they don't want to own these homes," says Warren Lovett, a real estate agent with Coldwell Banker in Atlanta.

Mr. Lovett has taken listings for about 60 foreclosed properties this year. He estimates that half of the foreclosures he's encountered are due to fraud.

--Mark Whitehouse, Rick Brooks and Stephanie Chen contributed to this article.

Write to Michael Corkery at michael.corkery@wsj.com

Posted by: guest at December 21, 2007 2:23 AM

"Mr. Wright was a phone technician earning only $105,000 a year"

Where do I sign up for the phone technician class?? In NY, no less.

Posted by: guest at December 21, 2007 6:35 AM

The What is upset because he found out that when he was making his $200,000 a year as a broker living the high life and thought he had made it, he was merely middle class. He thought he was at the high end, rich perhaps even, but the rug was rudely pulled out from under him. He discovered that at 200G a year not only was he middle class, he was smack dab in the middle of the middle, not even above the half way point. He figured it just wasn't worth it any more after busting his butt (not covered at the time with that peculiar article of haberdashery that he is so found of) selling all that property to all those suckers (who are still friends and clients). He let out a loud roar of despair. Something to the effect that this was the start of the war, and he slunk his way back to his 3 bd/2 bth third floor walk up with a seasonal sliver view of the park, new paint, refinished floor and cook's kitchen that he got for a a steal in 2003.

For the rest of us who thought we were doing ok, read the rest and despair.

$500,000 a Year Means You're Still Only Middle Class: Joe Mysak
2007-12-21 00:02 (New York)

Commentary by Joe Mysak
Dec. 21 (Bloomberg) -- Wall Street does a good job selling
municipal bonds to the rich, not the middle class.
That may have to change if hedge funds, which have been
such a prominent feature of the market during the past decade,
cut back their purchases of municipals, as some analysts
predict.
Here are the numbers: Of the 13,776 taxpayers who filed
returns with adjusted gross incomes of $10 million or more,
10,954 said they received tax-exempt interest -- 80 percent.
That's a pretty good penetration rate for any product. It goes
down pretty drastically after that.
The figures are from 2005, the latest available, and are
published in the always-compelling Table 1 of the Internal
Revenue Service's Statistics of Income Bulletin, the fall
edition of which is just out.
Of the 134.4 million returns filed in 2005, 4.5 million
reported receiving tax-exempt interest, up ever so slightly from
the year before, when 4.4 million returns reported such income.
There's your municipal bond market. By comparison, more
than 31 million returns claimed receiving ordinary dividend
income.
Of course, the table of figures, which breaks adjusted
gross income into increments such as ``$20,000 under $25,000''
and ``$40,000 under $50,000'' raises the question: Who's rich?
We are talking here in terms of cold dollars, not any of
the other things one might be rich in, as conveyed on the
greeting cards so popular at this time of year, and otherwise
unconvertible into legal tender at the cash register.

Dividing Line

I think we would all agree that $10 million a year, the top
IRS category, qualifies as rich.
So does between $5 million and $10 million. So does between
$2 million and $5 million. In fact, I think most Americans would
say that if you (singular and plural, as in married taxpayers
filing jointly), have an adjusted gross income of $1 million or
more, you qualify as rich.
If $1 million a year is incontrovertibly rich, who or what
is middle class? This question flummoxes pollsters and pundits
alike. The category is about as flexible as an accordion file,
and can expand and contract to accommodate almost any number.
The most-populous group of taxpayers in the U.S. is that
between $50,000 and $75,000, according to the IRS. In 2005, 18.4
million filers put themselves in that category. Does that
qualify as middle-class, or perhaps the beginning of middle-
class? If it is the beginning, where does middle-class end?
Does an adjusted gross income of between $100,000 and
$200,000 qualify as middle-class -- or as rich?

Most Interest

Who claims the most tax-exempt interest? It's not who you
think -- not the people at the very top of the food chain.
Those 10,954 taxpayers making $10 million or more, who also
said they received tax-free interest in 2005, claimed $5.2
billion, or about $476,000 each.
The group claiming the most tax-exempt interest is made up
of people who make more than $100,000 but less than $500,000.
Between the two categories ($100,000 under $200,000 and $200,000
under $500,000), there were 1.6 million filers claiming $18.6
billion in tax-exempt interest, or $11,392 each.
That $11,000 and change sounds almost pathetic, certainly
un-municipal-bondy, more like the returns from mutual funds.
What would you call this group? There are 13.5 million of
them altogether, meaning that Wall Street only manages to get
about 11 percent of this group interested in the municipal
market. Is a couple making just under $500,000 still in some
part of the middle class?

Rich for a Reason

Perhaps the answer depends upon where you live. It costs
more to live in places such New York, Boston and San Francisco.
It takes more money there to put together what one would
consider a comfortably middle-class life than it does in, say,
Maine or Kansas.
In last Friday's column I had some fun describing a blog in
which various commentators reacted to the news that some Goldman
Sachs bankers had just moved to Brooklyn Heights, and that more
might be on the way. The postings, as is typical with blogs,
were all over the place. Class envy was never very far.
At one point, one of the readers said that not all bankers
took car services -- ``rich people are rich for a reason.'' To
which another reader responded, ``They are rich because they
make million dollar bonuses, not because they save on carfare,''
ending his note with a choice expletive.
Is that where ``rich'' begins -- a $1 million bonus? Or is
it right below that category, in the $500,000 to $1 million
ranks?
The taxpayer category that grew the most between 2004 and
2005 was the ``$100,000 under $200,000'' bunch. More than a
million taxpayers graduated into this group, which grew from 9.7
million to 10.8 million. Surely that group doesn't yet qualify
as ``the rich.''
The group right above it -- $200,000 under $500,000 -- grew
by almost 400,000, to 2.7 million. Only 20 percent of them
claimed tax-exempt interest, averaging about $16,000 apiece.
Again, those are mutual fund-style earnings, which suggests Wall
Street isn't targeting that group for municipal bonds.
They aren't ``the rich.'' Maybe that's the top of the
middle class. Can you imagine? $500,000 a year, and you're still
just middle class?

(Joe Mysak is a Bloomberg News columnist. The opinions
expressed are his own.)

Click on {LETT } to comment on this column and write a
letter to the editor.

--Editors: James Greiff, Charles Siler

Posted by: guest at December 21, 2007 9:43 AM

Oops, should be "fond" not "found" in my last post - for you spell checkers

Posted by: guest at December 21, 2007 9:49 AM

Re: 109 Marlborough

This house is crazy overpriced!

The owners are not serious about selling, and are not very negotiable on the price.

Look at this house down the block, which was TOTIALLY RENOVATED, and sold for $875 5 months ago when the market was hotter than it is now

http://marykayg.com/html/0468.html

Posted by: guest at December 21, 2007 11:22 AM

Excuse me, but that house in caton park was hardly in the same ball park as the PPS house above. It was a flipper job, and the reno was a complete joke. The whole thing was pretty much just slathered in white paint and rebuilt the front steps. Even the few stained glass windows were still smashed. New owners are having to do pretty much everything. Go have a look. There was a thread devoted to the flip and what a joke it was right here on Brownstoner.

As for comps, Caton Park is one of the LEAST desirable sub sections of Victorian Flatbush. It was in crappy shape, to boot, hence the unusually low price tag. PPS is the MOST desirable. And the house above is a lot bigger, on a much better piece of property, and on a landmarked block. PPS homes routinely sell sell for twice what Caton park homes go for. There's just no comparison.

Sounds like you don't actually know a helluva lot about the neighborhood or the market. The PPS house is NOT crazy overpriced. It is SLIGHTLY overpriced, given the work needed. Houses in similar condidtion on Westminster and Stratford have sold for similar prices in recent memory. Why don't you go look at MKG website again, or better yet, ask her.

Posted by: guest at December 21, 2007 12:23 PM

http://www.marykayg.com/html/0473.html

Good comp, and this isn't even a prime PPS block!

And this one in Midwood Park - prettier exterior, but next to the Subway cut and in need of new kitches and baths, jut for starters.

Serious fixer uppers in non-landmarked sections have slipped to under a million, yes, and several Bungalows have sold recently for under the million mark. These bungalows, however, also needed serious renos, and are much smaller than the average Victorian Flatbush house. They were built for the pockets of less affluent families, according to the Victorian Flatbush house tour literature, and they still fill that niche today.

Posted by: guest at December 21, 2007 12:29 PM

"This board seems to have degenerated to a similar tone as you would find in a stock chat room."

MUCH, much worse, I'm afraid. It's a forum for the most vile hatred, name-calling, jealousy, race-baiting and outright hatred I've ever come across. It's pretty sad to realize there is so MUCH hatred across Brooklyn, and frankly somewhat startling that this vitriol should be revealed in a REAL ESTATE site.

Posted by: guest at December 21, 2007 12:54 PM

12:54--it's not that surprising. See, what you have here on brownstoner (in general) are two diametrically opposed groups: those with an interest in selling a property (sellers and brokers) and those with an interest in buying a property. Of course there are also those renovators, but no one pays them much attention, unless it's a slow news day. Anyway, that combo alone guarantees sensationalist and aggressive posts. There are hundreds of brokers trolling this site, just as there are hundreds of buyers. Everyday. All the time.

Posted by: guest at December 21, 2007 1:32 PM