Foreclosures of the Week: Bed-Stuy on the Block

The broker who convinced the babysitter that she could rob Peter to pay Paul on two properties should be sentenced to take over both mortgages. A moment’s thought should have told her that that wouldn’t work. If rent from A pays for B, what pays for B? What about other costs? Taxes, upkeep, water bills, ad nauseum? If she didn’t know about these things, and I know many lifetime renters just don’t, then two things should be mandatory for all real estate transactions in the future:

1. An independent attorney for the buyer. A legal aid type pool of attorneys could help poor people out, but no closing should take place without someone who knows more than the buyer sitting next to them.

2. A certificate stating that the buyer has completed a first time home buying course. Non profits like Neighborhood Housing give these free courses, where people are schooled on the basics, terminology, scams, what they need to bring to the table, mortgage calculators, and definitions of the kinds of loans available, and what all of the legalese means. They should also get a basic education in simple home inspection.

Much of this may be after the horse has left the barn, but buying a home is the biggest financial transaction most of us will ever make, and the repercussions affect us for years. Education should at least be a serious consideration, or people will continue to get ripped off, even in this new atmosphere of lessened and tighter credit.

Business from New York. “Thirty-four years worth of progress assembled street by street, block by block, house by house is crumbling before Cathy Mickens’ eyes.”

“‘It’s hard to see the neighborhood being torn apart,’ said Mickens, director of the Neighborhood Housing Services (NHS) of Jamaica, the gritty eastern edge of New York City.”

“Wander any of the side streets just off Jamaica Avenue, the neighborhood’s main drag, and her meaning is clear. Dozens of empty homes, ‘For Sale’ and ‘For Rent’ signs jammed into first floor windows, stand testament to an exploding housing crisis brought on by a flood of foreclosures tied to subprime mortgages.”

“Mickens said she and her staff of eight have been watching the storm clouds gather since around 2000, when they first began to see gimmicky loans created to help people with little money or bad credit — or both — obtain mortgages.”

“So they weren’t surprised when defaults and foreclosures started picking up around 2005. Still, they said they were taken aback by the deluge that poured down in 2007, when their client roster surged by 40% from a year earlier. ‘This isn’t a new problem for us, but now it’s huge,’ said Mickens.”

“Jackie Camacho, an NHS loan counselor, said many of her immigrant clients were duped into mortgages that promised payments of, say, $1,700 a month on loans often in excess of $500,000. Sounds great, right? A loan of that size would typically generate a monthly payment of more than $3,000.”

“Cerinelly Disla, an NHS foreclosure advisor, said many of her clients clearly got in over their heads. One client with a $28,000 annual income used a ‘no income verified’ loan (the name speaks for itself) to obtain a $650,000 mortgage.”

“Was there an element of greed at work on both sides — homeowners grasping for something too good to be true meeting brokers out to make a fast buck? Absolutely, said Disla.”

“Consider one of her clients, a babysitter with a stated income of $10,000, who obtained two mortgages on two properties with a combined value over $1 million. The broker who approved the mortgages told the babysitter the purchases would pay for themselves if she used rent from one property to pay the mortgage on the other. It didn’t work out that way.”

I’ve read stories of many people who used sub-prime mortgages to purchase homes, but did not hire an attorney. Anyone who does that is an idiot. Period.

I’d hazzard a guess that the Lafayette property was a pump and dump. Find some unsuspecting person with a clean credit record, use their name and credit to purchase the house, take out as much money as you can, pay off the person whose name you used and resell the property at an inflated price. If it can’t be resold you walk away and the dupe is left holding the bag.

I know someone who was caught up in such a scheme. Basically her “boyfriend” said let me use your name, you’ll get $10,000 at closing and another $10,000k at resale and all you need to to is show up on both days to sign some papers.

She did it, got the first payment which she used to pay off her credit card debt then they broke up, he disappeared, mortgage companies start calling her looking for their payments and she’s in a quandry. She ended up getting out but not without coming very close to doing jail time for fraud, and with a credit history that it will take the rest of her life to even come close to repairing. Her ex-boyfriend is a wanted man, but last she heard, he was in Philly doing the same thing there.

Its amazing how many people got involved in these schemes out of ignorance and in the meantime, the realtors who were running them have taken the money and skidaddled. Meanwhile neighborhoods are left behind with property that is so inflated no one wants it, and the folks that do can’t afford it. Its greed and criminality that’s driving this, nothing more.