PART 2 of 2
Coach Mitchell Goldstein
October 22, 2011
Builder Bailout Schemes
Builders are employing builder bailout schemes to offset losses and circumvent excessive debt and potential bankruptcy as home sales suffer from escalating foreclosures, rising inventory, and declining demand. Builder bailout schemes are common in any distressed real estate market and typically consist of builders offering excessive incentives to buyers, which are not disclosed on the mortgage loan documents. In a common scenario, the builder has difficulty selling the property and offers an incentive of a mortgage with no down payment. For example, a builder wishes to sell a property for $200,000. He inflates the value of the property to $240,000 and finds a buyer. The lender funds a mortgage loan of $200,000 believing that $40,000 was paid to the builder, thus creating home equity. However, the lender is actually funding 100 percent of the home’s value.
The builder acquires $200,000 from the sale of the home, pays off his building costs, forgives the buyer’s $40,000 down payment, and keeps any profits.
The bank underwriting [checking] is at fault, again. The bank merely needs to insist upon the actual verification of funds from the buyer. However, if the bank did this, then very few loans would close, so they just wink. But the FBI chases the builder instead of going after the bank. The FBI also is not going after the appraiser who must over appraise the property by the $40,000.
Debt Elimination/Reduction Schemes
FBI reporting indicates a continued effort by sovereign citizen domestic extremists throughout the United States to perpetrate and train others in the use of debt elimination schemes. Victims pay advance fees to perpetrators espousing themselves as “sovereign citizens” or “tax deniers” who promise to train them in methods to reduce or eliminate their debts. While they also target credit card debt, they are primarily targeting mortgages and commercial loans, unsecured debts, and automobile loans. They are involved in coaching people on how to file fraudulent liens, proof of claim, entitlement orders, and other documents to prevent foreclosure and forfeiture of property.
There is a legitimate line of philosophic thought surrounding the idea of the citizen as a "sovereign." Learn about this issue yourself. The FBI labels these sovereign citizens "extremists." See what you think about how our vaunted FBI mislabels citizens, the very people they are sworn to defend.
The Dodd Frank Act (DFA) was created to address various issues that occurred during the financial crisis. According to MBA, the DFA will establish the Consumer Financial Protection Bureau (CFPB) and set strict standards and regulations for processing mortgage loans. To protect consumers from fraud, the CFPB will: (1) regulate strict guidelines for appraisers and licensing to appraisal management companies; (2) oversee and have total responsibility for consumer financial protection laws; (3) add more layers to disclosures, licensing, and process regulation with loan originators, reverse mortgages, mortgage companies, and advertising practices; and (4) harmonize the TILA and RESPA disclosure.
The new act will prohibit the use of BPOs as the primary benchmark for the value of a property being purchased. Additionally, the CFPB will oversee consumer protection laws, including TILA and RESPA. The DFA will require lenders to be accountable for the cost it provides to borrowers during the loan application process. The legislation will modernize the real estate appraisal regulation by enforcing actions against states and appraisers that do not abide by the new regulation. Also, there will be a new appraisal standard board and appraisers should follow the new regulations. The DFA is set to better regulate consumer protection laws and help reform Fannie Mae and Freddie Mac.
The answer of government is always and in all ways to expand its own power and reach. Government does this by making up more regulations. The newest iteration is the Consumer Financial Protection Board, CFPB.
Government creates mortgage regulation, for our "protection." Bankers create ways to go around the rules so that they can do business. The result is a government created financial crises which is then "fixed" by the creation of a new super agency to make more rules.
BTW, the result of new regulation is always a business contraction and consolidation of an industry. In this case, already in New York State, fully one third of the mortgage brokers have gone out of business because of the new rules; see SAFE Act below.
Federal Trade Commission’s (FTC) Mortgage Assistance Relief Services (MARS) Rule
The FTC rule on MARS prohibits charging advance fees for loan modification services, but states that attorneys are the exception [because lawyers are known to have the highest of ethical standards ed.] to the rule and are therefore permitted to charge an advance fee provided some stipulations are met.
The Secure and Fair Enforcement Act
The Secure and Fair Enforcement (SAFE) for Mortgage Licensing Act—enacted in July 2008— required states to have a licensing and registration system in place for all loan originators by July 31, 2010, to reduce mortgage fraud and enhance consumer protection.
This requires that anyone creating a mortgage must be licensed to do so. According to the new law, a regular citizen must be licensed as a mortgage originator if he wants to carry a mortgage against his own property, making it much harder to sell your own property, especially in a market where credit is tight. When banks won't lend, virtually the only way selling can be done is if the seller carries the financing. The government has stopped this. The government makes a criminal out of someone trying to sell their home. Now that's criminal. I believe that it is also unconstitutional.
Worse; the government puts conditions on creating a private loan such that the only persons who can be given a privately created loan are those who qualify for a regular bank loan. If the buyer could get a regular loan, then they would not need a seller to create a private loan. And you can't create a private loan except with the same terms as a regular bank loan; hardly something you would do. Therefore, the government says you can still create a loan, if licensed, but they eliminate any real ability for you to do it. This bit of chicanery gets the "Miscreant Class" award for today.
The FBI continues to foster relationships with representatives of the mortgage industry to promote mortgage fraud awareness and share intelligence. FBI personnel routinely participate in various mortgage industry conferences and seminars, including those sponsored by the MBA. Collaborative educational efforts are ongoing to raise public awareness of mortgage fraud schemes through the publication of the annual Mortgage Fraud Report and the Financial Crimes Report to the Public, and through the dissemination of information jointly or between various industry and consumer organizations. Analytic products are routinely distributed to a wide audience, including public and private sector industry partners, the intelligence community, and other federal, state, and local law enforcement partners.
The FBI employs sophisticated investigative techniques, such as undercover operations and wiretaps, which result in the collection of valuable evidence and provide an opportunity to apprehend criminals in the commission of their crimes. This ultimately reduces the losses to individuals and financial institutions. The FBI has also instituted several intelligence initiatives to support mortgage fraud investigations and has improved law enforcement and industry relationships. The FBI has established methodology to proactively identify potential mortgage fraud targets using tactical analysis coupled with advanced statistical correlations and computer technologies.
These last two paragraphs are a good example of government double-speak disguised as agenda setting marketing. What it does not say but is doing: the FBI is the instrument of the Power in this country. The FBI will root out regular citizens trying to make a living and it will misdiagnose their actions so as to mislabel them as villains in order to not go after the real villains, their bosses - the Power.
The FBI has purposefully not gone after those who make the decisions within the banking industry, the bosses. Not a single loan closes without the bosses express approval, and the bosses only approve loans that they want to close. For every government regulation there is a banking work around. Each regulatory effort to make loans safe comes up against the desire to make a bonus. I doubt that a banking regulation goes into effect without the banker knowing how he will legally work around that regulation. It is the job of the bank to take information and check it. But checking reduces income. And why check if the taxpayer will pay the penalty? That is the problem. Sadly, a once great institution has allowed itself to be turned into an instrument of state policy to defraud US. The FBI is a functioning part of the Miscreant Class.
FBI, as an agent of The Power, knowingly does not examine the most important
question, why banks did not and are not currently checking the information
that applicants give. This glaring omission brands the FBI as culpable
in the effort to enslave US. Requiring a license, restricting commerce,
eliminating property rights, and creating scapegoats; these are the hallmarks
of Gotcha Government. The Dodd/Frank SAFE Act enshrines these principles.
"The right to sell is one of the rights of property." --Thomas Jefferson to Handsome Lake, 1802. ME 16:395
The ability to sell is inherent within the right to sell. The terms of the sale are inherent within the ability to sell.
Government has allowed/created a financial climate whereby banks are not giving mortgages to most potential borrowers. For the foreseeable future, owner financing is virtually the only way a buyer will be able to purchase your property. You must be the bank.
By requiring a seller to have a mortgage license in order to create a mortgage on his own property, the government is placing an unreasonable burden on the seller, and has therefore severely reduced his ability to sell.
The government further stacks the deck by only allowing an owner financed mortgage to be created that has terms identical to a bank mortgage. In addition, a balloon or quick payoff is not allowed so a retired person cannot sell his property and expect to get monthly payments for a short period, five years, and then get the rest of the balance. The retired person must wait 30 years to be paid in full, a requirement that is not practical. Both of these requirements do not allow for the terms of a sale to be created by the buyer and seller. This is gross interference by the government into the rightful affairs of a free citizen.
The Constitution has stipulated that a “taking” of property by government requires “just compensation.” Congress has severely reduced the ability to sell our property and has thus “taken” the profit that could have been gained and therefore owes US “just compensation.” That this infamous legislation passed indicates the path of our destruction and a culpable Congress. Forces inimical to freedom are controlling our ability to sell our property. Control of the means of production, property, is called Fascism.
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As outlined in the Federalist, the proper role of government is the defense of our rights to life, liberty and property, against any incursion, especially from government. A violation must have occurred and only then should the government get involved to punish the violator. This is referred to as Negative Government. Positive Government is the aggressive use of law to prevent something from happening. “Protection” is the term used by government to confuse uneducated citizens. Government creates law to protect US from a potential negative act and we become less free because we are all required to act in a certain manner. We are all presumed to be violators, eliminating our constitutionally mandated presumption of innocence. Power is thus granted to government to restrict our actions in any way it sees fit.
With the SAFE Act, the government says it “protects” US from a future mortgage crisis by restricting those who can do mortgages and limiting the terms of the mortgage. Rather, government should be defending US by aggressively prosecuting those specific individuals who created the mortgage crises and any bad mortgages. You can be sure that there would never again be a mortgage crises if the CEO’s and Boards of Directors of the Too Large To Fail Banks were now rotting in jail alongside the CEO of Goldman Sacks, et al.
The only way to fight evil is to overcome it. Fight fire with a conflagration of your own. Fight the banks and government by earning your own money and becoming independent. In this manner, we will win the day, but only if you are a good example to fellow citizens.
Gird your loins – the battles ensue.
© 2011 Mitchell Goldstein - All Rights Reserved
Coach (Mitch) Mitchell Goldstein is a Nationally Recognized Expert in tax delinquent property investing and a Real Estate Investor since 1972 in commercial and residential properties.
Coach Mitch is dedicated to helping would be real estate investors to attain their financial goals through investing in tax delinquent real estate and has created various products and services to facilitate the tax delinquent real estate investor.
Mitchell is a Jewish American of Hungarian and Polish extraction and a fan of Locke, Jefferson, and Madison, whose instincts against accumulated power have proven prescient; and of Washington, and Hamilton, whose notions regarding consolidated power required that honor and the highest moral behavior be the hallmark of those exercising power.