Monday, January 07, 2008

Mortgage Kickbacks at over a third of the sale price?

This is really astonishing. I know that my favorite part of the housing bubble has always been the "guarantees" that banks would buy the loans back from the securitors if they went bad, but if I can actually wrap my head around this, it could supplant it.

From the Housing Bubble Blog...

[Steve] Hawks [of ReMax Platinum] said he examined title work on several homes and found that someone had removed an addendum that instructs the title company to issue checks to a third-party limited liability corporation. The document is removed or hidden, either way with same result, he said.

For example, a $500,000 listing is bumped to $800,000 and $300,000 gets kicked back to the third party through the addendum. If the institutional investor knew about the $300,000 cash, they would never buy the loan. That's why the addendum has to be pulled or hidden, Hawks said.

Of course, this is Las Vegas. This is out and out criminal behavior; it's not going to get to be my favorite thing unless it turns out to have been national and structural. It's an enforcement failure, which I don't think is as cool as a legislative or regulatory failure.

But, it could have been national, it could have been reported upward in the 90s or early aughts, and it could have been the result of explicit cuts of enforcement agents. So, all in all pretty emblematic, but it has a few hurdles to jump if it wants to be my absolute favorite thing.

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