(snip)"False docs in hand, straw buyers obtained mortgage loans they had no intention of paying. Some 300 single family homes in Jefferson County and the adjoining Denver area are known to have been involved. In 191 transactions every single qualifying document was fake. So far, 38% of the mortgage loans have gone into foreclosure. Millions of dollars have been lost.
Tuff luck for lenders? Not as much as you’d think. The mortgages were insured by the Federal Housing Administration (FHA), a sub agency of the U.S. Department Of Housing and Urban Development (HUD). Taxpayers picked up the bad. Expect them to pick up more. D.A. Scott Storey believes thousands of other properties were obtained by the same ring and that similar frauds are widespread in the Denver area. And in an August 24th Denver Post article, “FHA program key in surge of foreclosures,” a government source estimated that “20,000 illegal immigrants hold FHA mortgages in metro Denver alone.”
Many of the frauds perpetrated by the Jefferson County ring were powered by an FHA lending assistance arrangement under the HUD category Downpayment Assistance through Secondary Financing Providers. Aka DAP. This particular DAP arrangement is commonly called the FHA gift program and is meant to benefit low income, first time home buyers. Mortgages insured by the FHA require 3% down payment. In the past, only family and friends were allowed to provide down payment assistance. But in 1998, the FHA started letting sellers contribute down payments via group funds administered by charitable, non-profit organizations. Eight years later, even HUD acknowledges such organizations are frequently for-profit fronts. Plus, sellers raise the price of properties to cover down payment contributions. Closing costs and FHA insurance premiums are also rolled into the loans. Ultimately, gift program mortgages, granted in the name of affordable housing, wind up costing buyers more than the property is really worth.
The gift program gouges sincere home buyers, but gifts grifters who instantly default. For the past eight months, Colorado has led the nation in foreclosures. The foreclosure tsunami has been most destructive in low income urban neighborhoods, where the gift program has been used in the name of urban revitalization."(snip)
This blatant and deliberate 'gaming' of the system would not have been possible without the tacit consent of mortgage lenders, pure and simple. I'm also wondering how in hell it's so easy for illegal aliens with no 'official' incomes to obtain mortgage financing ? The 'tin foil hat' crowd would tell me that HUD was/is under a directive to make sure that minorities were to be given every possible break to obtain mortgage financing in order to encourage minority home ownership ( see ) , but still ....
Nonetheless, as the news blurb points out, the US taxpayer via the FHA must cover the losses ! And the US taxpayer will wind up eventually covering even more losses when the GSE's ( Fannie Mae, Freddic Mac ) finally publish accurate financials.
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