Foreclosure of the Week: 14A Monroe Street

Wall Street Journal - Where home prices are holding up...

New York

While New York's commuter market -- which includes suburban New York, New Jersey and Connecticut -- is down about 8% from its peak in mid-2006, much of Manhattan continues humming along. Neighborhoods such as SoHo, the Lower East Side, Greenwich Village, Chelsea, Murray Hill, the Upper West Side and Harlem are all up in the past year, according to DataQuick's Zip Code analysis.

Bidding wars still happen. Toni Haber, an executive vice president at Prudential Douglas Elliman, a New York City real-estate firm, says 60 people waited in line recently at an open house to view a three-bedroom apartment in Greenwich Village. The owner had four competing offers within the week, and agreed to sell for about $2.5 million -- $300,000 over the asking price.

Part of the city's strength comes from the fact that few buyers were investing in properties to flip them. Moreover, many apartment buildings in New York aren't condominiums but co-ops, which impose financial demands on potential buyers far more rigorous than banks do -- which helps keep the number of foreclosures down. In addition, foreign investors have been exploiting the weak dollar by grabbing Manhattan real estate.

One area of weakness: the Financial District in Lower Manhattan, where median prices are down, in part because of an abundance of new construction in the area.

Those areas of Brooklyn that are close to Manhattan are also holding up well. On the periphery, places like Jamaica, Queens; parts of the Bronx; and nearby New Jersey towns such as Jersey City and Hoboken are off between 3% and 14%.

Farther out, popular commuter towns like Summit and New Providence, N.J., are down at much as 16%. Pockets of suburban strength do exist, though. High-end suburbs in New York's Westchester County such as Chappaqua are up over the past year.

Posted by: guest at May 20, 2008 11:23 AM

such a nice little house I hope it goes to someone that loves it...

Posted by: guest at May 20, 2008 11:30 AM

I really do believe that there's been a lot of predatory lending going on, and my heart goes out to people who were bamboozled into thinking they could afford places they really couldn't. But this indeed seems to be an example of s/o going in their with every intent to defraud. So was the money taken out to finance other properties which were then flipped? An Acris search might reveal that. (We don't know about the second buyer. They might have just gotten in over their heads!)

Posted by: guest at May 20, 2008 11:47 AM

That's what I call real estate fraud. All concerned should be in jail. This type of activity, costs the public big bucks in terms of rising costs the banks and mortgage companies pass along to honest people, and extra tax dollars needed to prosecute these people.

More importantly to communities, it causes artificially high price points for properties that are not worth it, in neighborhoods that need middle class homeowners to revitalize blocks like this. If only millionaires can afford places like this, which they will not buy, the properties will remain boarded up, and neighborhoods will remain blighted, which is a lose-lose for everyone.

Montrose Morris

Posted by: guest at May 20, 2008 11:48 AM

do people ever get prosecuted for this type of activity? or do they walk away hundreds of thousands of dollars richer?

Posted by: guest at May 20, 2008 11:52 AM

In Five years, that property tripled in Value???

Idiots.

Posted by: guest at May 20, 2008 11:55 AM

Now who dose the bank get rid of this house? It only work 400-600K tops well under the loan amount...

Posted by: guest at May 20, 2008 11:56 AM

Gotta be complicity on the part of the mortgage broker, no? Who would okay such a shady proposition if he or she weren't going to benefit?

Why did the lender okay it?

Posted by: guest at May 20, 2008 12:01 PM

"Gotta be complicity on the part of the mortgage broker, no? Who would okay such a shady proposition if he or she weren't going to benefit?

Why did the lender okay it?"

Because it's the appraiser who is on it.

Posted by: guest at May 20, 2008 12:15 PM

fraud and corruption in Brooklyn are older than the brownstones. let the buyer beware.

Posted by: guest at May 20, 2008 12:20 PM

The seller (the guy who bought the property for what seems to be a legitimate price of $325,000, took out a $570,000 mortgage the same day, and then sold it for $950,000 two years later, is one David Neustein. The lender, who either securitized the loan or is or is eating it, is Credit Suisse First Boston.

The question is, who is David Neustein, and how was he able to make $625,000 flipping a tired old house in Bed-Stuy in a 2-year period?

Posted by: guest at May 20, 2008 12:28 PM

It would be quite a coincidence if this wasn't him:

http://209.85.173.104/search?q=cache:ukEk08gT0mUJ:www.mortgagefraudblog.com/index.php/weblog/permalink/twenty_three_indicted_in_new_york_straw_buyer_scheme/+David+Neustein&hl=en&ct=clnk&cd=5&gl=us

Posted by: guest at May 20, 2008 12:41 PM

The person who bought the house for 950k, is an idiot. Actually, the bank is dumb for approving the loan. I can't imagine that house being worth that at the time of purchase. Are bank appriasers blind?

Posted by: guest at May 20, 2008 12:42 PM

Not sure the link worked:

Twenty Three Indicted in New York Straw Buyer Scheme
Twenty-three individuals were indicted in the Southern District of New York on allegations that they participated in an illegal scheme to defraud various banks and financial institutions by submitting fraudulent applications and supporting documentation for mortgages and home equity loans. As
a result, the lenders were induced to make loans to persons and at terms that the lenders otherwise would not have funded. The defendants include brokers and processors who worked at the mortgage brokerages AGA Capital NY, Inc. (’AGA Capital‘) and Northside Capital NY, Inc. (’Northside Capital‘), in Brooklyn, New York, real estate appraisers and loan account executives.

As alleged in the Indictment unsealed in Manhattan federal court:

From 2004 through December 2006, Northside Capital, AGA Capital, and its successor, Lending Universe Corporation, brokered over one thousand home mortgages and home equity loans, with a total face value of at least $200 million dollars, with various banks and lending institutions. Northside Capital, AGA Capital, and Lending Universe, earned a total of at least $4 million in commissions and fees on these loans. The lenders that issued the mortgages and loans brokered by Northside Capital, AGA Capital, and Lending Universe have suffered actual losses of at least $3.5 million as a result of the defendants’ fraud scheme.

The eight-count Indictment charges the following defendants with conspiracy to commit bank and wire fraud, and several of the defendants with bank and wire fraud in connection with the procurement of seven specific mortgage and home equity loans:

...

David Neustein, appraiser;

...

As part of the fraud scheme, the defendants identified properties for sale in multiple locations including all five boroughs of New York City, New Jersey and Sullivan County, New York. The defendants typically purchased the target properties with one or more mortgages and/or home equity loans amounting to 100 percent of the purchase price of the property, thus ensuring that the defendants did not have any money at risk in the fraudulent transactions.

The fraud also involved paying individuals who fit a certain financial profile to act as phony purchasers, or ‘straw buyers’ of the target properties. The defendants then prepared and submitted false and misleading information concerning the straw buyer’s current residence, employment, income, assets, and existing debt. In support of these false and misleading representations, the defendants also created false documentation, such as bank statements and proof of income, on which the lenders relied to verify the statements in the loan applications.

In addition, the defendants sought mortgages and home equity loans for the target properties at values that were in excess of the properties’ actual sale prices and, thus, the properties’ true market values. To support applications for loans in excess of the properties’ market values, the defendants procured artificially inflated appraisals of the market value of the target properties. Using these false appraisals, the defendants received mortgages and other loans in excess of the actual sale price of the properties securing the loans. The difference between the appraised value of the property and the property’s actual sale price represented, in part, the defendants’ profits from the scheme.

The defendants distributed the profit from each fraudulently obtained mortgage loan amongst themselves for their personal gain. The defendants also earned commissions of at least 2 percent and as much as 4 percent on the fraudulently inflated loan values, in addition to fees and other monies distributed upon the closing of each property.

If convicted, each defendant faces a maximum sentence on each count of the Indictment in which he or she is charged of thirty years in jail and a fine of the greater of $250,000 or twice the gross gain or loss resulting from the crime.

Posted by: guest at May 20, 2008 12:45 PM

This house would be great for a middle class family that makes under 100K year but now it has a million dollar price tag the bank will have to wait 10 years to get there money...

Posted by: guest at May 20, 2008 12:49 PM

Can some one explain that article about mortgage fraud in plain english.

I don't understand how it was done.

Posted by: guest at May 20, 2008 12:50 PM

12.42 and 12.45 here:

They bought houses with 100% mortgages at 'market price'. They waited a bit then arranged a phony sale to a phony buyer at a massively inflated price again primarily financed. The group included appraisers and they managed to create all the documents needed to convince lazy lenders that the deals, and the buyers, were actually legitimate.

The Sellers and Buyers then split the mortgages proceeds and stop paying. The Lenders look to foreclose only to discover the property isn't worth what they thought it was and the Buyer/Borrower has dissappeared.

Posted by: guest at May 20, 2008 12:58 PM

How can a buyer dissappear....don't you need social security numbers, addresses, etc.

Maybe I'm naive, or just honest, but I don't understand how people think they can get away with this.

Posted by: guest at May 20, 2008 1:17 PM

12:42, the bank appraisers are not blind. And they don't even take bribes. But they know that their mortgage clients will cut them off in five seconds if they don't bring the appraisal in at the "sale price."

The difference between The Bronx and Brooklyn is that with the exception of Riverdale and a couple of other small areas, market values are pretty uniform in The Bronx, so fraud on this scale is rare. In Bed-Stuy, you can appraise a house on a crappy rundown block, and use comps one-half mile away on the best block, where market values could be twice as high (or more). Unless the person reviewing the appraisal is very familiar with the area, it could appear to be a reasonable report.

Posted by: guest at May 20, 2008 1:23 PM

Its true I only live a mile and a half away from Ft Greene but I am in Stuyvesant Heights... Ft Greene were a house sold last year for 3 million+ are part of my comps. That 3 million dollar house is just a bit smaller than mine.

Posted by: guest at May 20, 2008 1:39 PM

Its true I only live a mile and a half away from Ft Greene but I am in Stuyvesant Heights... Ft Greene were a house sold last year for 3 million+ are part of my comps. That 3 million dollar house is just a bit smaller than mine.

Posted by: guest at May 20, 2008 1:39 PM

This house seems more in Clinton Hill than Bedford Stuyvesant.. Monroe St. and Classion St... I think Bedford Stuyvesant starts somewhere between Franklin and Bedford...

Posted by: guest at May 20, 2008 1:44 PM

Who were these buyers and what became of them? Any charges filed?

Any lender should have been very suspicious of the quick turnarounds and rocket blast upward in pricing.

And always 100% mortgaged loans? Another bright flag they missed...

Posted by: guest at May 20, 2008 2:13 PM

hey - is 1.46 the slow day moron aka the faded type moron aka the flea market has been cancelled moron?

Posted by: guest at May 20, 2008 2:15 PM

Brownstoner, you circled the wrong house it is the house to the left.

Posted by: guest at May 20, 2008 3:10 PM

Brownstoner,

What resources do you use to find this stuff out?

Posted by: guest at May 20, 2008 8:55 PM

Hey Stoner, would you do me a favor and post some pics of your kids, preferably nude.

F*ckwad.

Posted by: guest at May 20, 2008 11:38 PM

This is a such shame this happened. My husband and I with our 2 kids bought on this Monroe st. block a few months ago. We did our homework and lucky our broker/lender was not a crook. We are coming from Tribeca and now we love it here. Its probably the best block in the area. Quiet, friendly neighbors, quick access to trains. It changing for the better day by day.

Also, check all your facts. This in not Bedstuy. Its on the edge of Clinton hill. That's why these properties are so ridiculously expensive.

Posted by: guest at May 22, 2008 11:20 AM