Recent indictments show central Ohio’s contribution to national mortgage crisis
Author: boored
Category: Real Estate
Accusations contained in a 36-count federal indictment announced last Wednesday against nine people contain several elements of the larger picture.
At the center of the case are property investor Donald F. Green and others, who bought distressed properties at rock-bottom prices and resold them for much more. Government and law-enforcement officials long have been interested in Green because of his frequent and unorthodox real-estate transactions.
The indictments outline a scheme that has become familiar as the mortgage crisis has unfolded. The allegation is that appraisers assigned the properties a value far in excess of reality so that others involved in the scheme could sell them for a huge profit, a practice called flipping.
Making those sales, according to the allegations, involved roping in unsuspecting players at opposite ends of the socioeconomic scale. At one end, unsophisticated straw buyers were persuaded to sign their names to mortgage papers for a cash payment and a promise that the property would be resold before the first payment came due. At the other end, wealthy investors seeking alternatives to the stock market put their money into hedge funds that, in some cases, were packed with just the sort of bad loans Green and the others are accused of engineering.
Losses to those funds and to financial institutions that failed to recognize bad loans are partly to blame for the recent stock-market volatility that is making investors at all levels lose sleep.
The roots of the American mortgage mess are complex, and they include greed and fraud on the part of dishonest brokers as well as lack of due diligence by borrowers who signed on to terms they didn’t understand and couldn’t meet.
But they include other factors, too, such as the failure of credit-rating agencies to realistically report on the high risk involved in mortgage loans made without traditional safeguards.
The situation clearly calls for better regulation, which Ohio has provided with legislation passed last year, as well as vigorous prosecution of crimes related to mortgage lending.
Central Ohio law enforcement appears to be doing its part.
The indictments announced on Wednesday were followed on Thursday by indictments of two other Columbus-area men accused of obtaining inflated mortgages, based on fraudulent appraisals, on properties in Franklin and Ottawa counties.
With local law-enforcement agencies cooperating in the Central Ohio Mortgage Fraud Task Force, the public is likely to hear about more mortgage scams.
Rooting out fraud is essential to restoring the integrity of the American Dream.
Source:
investment property
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