AG announces $25 Billion mortgage crisis settlement
AG announces $25 Billion mortgage crisis settlement |
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Attorney General Eric Schneiderman, head of the Residential Mortgage-Backed Securities Working Group unveiled by President Obama in his state of the Union address, stood firm against a settlement that would have hurt his effort to prosecute those responsible for the “housing bubble.” Photo by AP photo.
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The nation saw “the largest ever, joint state-federal settlement in the history of our country,” last Thursday, according to U.S. Housing and Urban Development Secretary Shaun Donovan, totaling $25 billion.
For the past year, attorneys general from across the nation have been working towards a settlement that would not only punish the five largest banks responsible for the housing crisis, but would give real relief to former and current homeowners who have been negatively affected by the burst of the housing bubble.
New York Attorney General Eric Schneiderman announced “a $136 million settlement for New York … the most per underwater borrower for any state in the nation, and the fourth highest dollar amount nationwide as part of the federal-state settlement.”
The Mortgage Servicing Settlement has the country’s five largest loan servicers; Ally/GMAC, Bank of America, Citigroup, JPMorgan Chase and Wells Fargo, providing as much as $20 billion in mortgage relief for currently distressed borrowers and another $5 billion in direct payments to state and federal governments which will disburse the money to homeowners who had their homes foreclosed between 2008-2011.
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The “relief” money will be broken up into $10 billion dedicated to principal reduction for borrowers whose homes are in danger of foreclosure and whose homes are “underwater,” $3 billion for anyone who is “underwater” and $7 billion in other forms of relief.
The settlement also provides new servicing standards for lenders, who among other requirements, must stop abuses such as robo-signing and must now “make foreclosure a last resort by requiring servicers to evaluate homeowners for other loan mitigation options first,” according to HUD.
Each individual bank will pay over the next three years, with incentives for those who pay in the next 12 months:
Ally Financial, Inc. — $110 million in payments, $200 million relief.
Bank of America Corp. — $3.24 billion in payments, $8.58 billion in relief.
Citigroup, Inc. — $415 million in payments, $1.79 billion in relief.
J.P. Morgan Chase & Co. — $1.08 billion in payments, $4.21 billion in relief.
Wells Fargo & Co. — $1.01 billion in payments, $4.34 billion in relief.
According to Donovan, it is important to note that Bank of America is paying the most money, not because they had the most mortgages or money loaned, but because they had the most number of abuses and improper loans.
In addition to the $136 million in payments to New York, Schneiderman’s office said New York homeowners will benefit from the refinancing program to the tune of an estimated $140 million, and benefit from forced loan modifications estimated around $495 million.
Schneiderman had been holding out on signing the agreement for months to ensure that he would still be able to pursue criminal charges against those deemed responsible for the housing bubble crisis.
According to Schneiderman’s office, the settlement “preserves the legal authority of the Schneiderman-led Residential Mortgage-Backed Securities Working Group announced by President Obama in the State of the Union address.” That joint investigative unit combines with the Department of Justice to prosecute “those responsible for misconduct contributing to the financial crisis.”
Under the new settlement, Schneiderman can continue with his lawsuit brought against financial institutions for their use of a private national Mortgage Electronic Registry System, with membership including JPMorgan Chase, Bank of America, Wells Fargo, Fannie Mae and Freddie Mac, which is believed to be the tool that enabled robo-signing.
“On multiple fronts, we will continue to investigate the mortgage crisis that has impacted communities in every corner of this state, and ensure that justice and accountability prevail,” said Schneiderman.
Other related settlements that were announced last Thursday were a mortgage servicing subsidiary of Bank of America agreeing to settle a Federal Trade Commission charge that it illegally assessed more than $36 million in fees against struggling homeowners and a $394 million penalty paid by all the banks except Ally over foreclosure abuses.
Jumbo’ Loans Set to Lower Oct. 1
Jumbo’ Loans Set to Lower Oct. 1
Starting Saturday, many borrowers in pricey housing markets may find they’ll need a higher down payment or pay higher rates. The size of mortgages that the government will back in several high-priced regions is set to drop on Oct. 1, which some analysts expect will serve as another thorn to the housing market.
In 2008, Fannie Mae and Freddie Mac raised its cap on conforming loans up to $729,750 in some of the most expensive housing markets so that larger mortgages would be available to home buyers. But those caps are set to reset on Oct. 1, scaling back to a maximum of $625,500 in some areas of the country.
Housing analysts say the drop will make it more expensive and harder for some buyers to qualify for home purchases in expensive markets, particularly along the coasts.
“The down-payment issue is the most significant aspect form borrowers standpoint,” says Greg McBride, a senior financial analyst at Bankrate.com. “These changes will price some prospective borrowers out of the market.”
Source: “Big Borrowers Face Larger Down-Payments, Rates,” MarketWatch (Sept. 30, 2011) and “Big Mortgages: Harder to Get and More Expensive With Loan Caps,” CNNMoney (Sept. 30, 2011)
Pending Home Sales Dip in August
Pending home sales slipped in August with a mixed regional performance but are higher than a year ago, according to the National Association of REALTORS®.
The Pending Home Sales Index, a forward-looking indicator based on contract signings, declined 1.2 percent to 88.6 in July from 89.7 in July but is 7.7 percent above August 2010 when it stood at 82.3. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said the decline reflects an uneven market. “The biggest monthly decline was in the Northeast, which was significantly disrupted by Hurricane Irene in the closing weekend of August,” he said. “But broadly speaking, contract signing activity has been holding in a narrow range for many months.”
The PHSI in the Northeast fell 5.8 percent to 63.6 in August but is 1.3 percent higher than August 2010. In the Midwest, the index declined 3.7 percent to 76.2 in August but is 8.2 percent above a year ago. Pending home sales in the South rose 2.6 percent to an index of 96.9 and are 7.6 percent higher than August 2010. In the West, the index dropped 2.4 percent to 108.1 in August but is 10.5 percent above a year ago.
Yun said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said. “Based on the improving fundamentals of population growth, some job additions, rent increases and higher stock market wealth, we should be seeing existing-home sales closer to 5.5 million, but are expecting just over 4.9 million this year. The unnecessarily restrictive mortgage underwriting standards are attenuating the housing recovery and are a risk factor for the overall economy.”
Although economic growth as measured by the gross domestic product is expected to remain positive, uncertainty is causing some consumer hesitation. “We need to remove the road blocks to the housing recovery for people who are trying to take advantage of excellent affordability conditions,” Yun added. “Unfortunately, some buyers also will face notably higher mortgage rates on jumbo loans because of a lack of competition in the banking industry.”
Source: NAR
First Time Home Buyers Losing Interest in Short Sales
Processing delays have taken their toll on first-time home buyer interest in short sales, which now account for more than one of every six house sales, according to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey.
First-time home buyer purchases of short sales dropped to 39.7 percent of short sale transactions in August. That represented a three-month slide and was the lowest level for first-time home buyers ever recorded by the HousingPulse survey.
The first-time home buyer share of short sales hit a peak of 54.1 percent of all short sale transactions in November 2009, just before the originally-scheduled expiration of the federal homebuyer tax credit.
Short sale transactions have long been problematic for buyers and sellers alike, with typical approval times of several months after a homebuyer first submits an offer. Factors slowing down short sale approvals include lost paperwork, coordination with multiple investors, slow appraisals, and mortgage servicer understaffing.
Still, for many first-time home buyers, average short sale prices of 27 percent lower than non-distressed properties compensated for the wait time. But with average time-on-market for short sales stalled at 16.6 weeks—with the majority of that time spent waiting for short sale approval—short sale transactions are becoming less popular with first-time home buyers.
Short sales are just one type of distressed property, with damaged REO and move-in ready REO also being significant components of today’s housing market. In August 2011, short sales accounted for 17.1 percent of the home purchase market, with damaged REO and move-in ready REO accounting for 13.2 percent and 15.6 percent, respectively.
The total proportion of distressed property, as represented by the HousingPulse Distressed Property Index (DPI), fell to 45.9 percent in August from 46.2 percent in June.
Real estate agents responding to the August survey indicated that home buyers frustrated with short sale delays are resorting to placing offers on multiple properties, with the intention on closing on only one. This practice can bog down the short sale approval process at mortgage servicers.
The Campbell/Inside Mortgage Finance HousingPulse Tracking Survey involves approximately 2,500 real estate agents nationwide each month and provides up-to-date intelligence on home sales and mortgage usage patterns.
For more information, visit www.realestateeconomywatch.com.
Fed Official: Housing Market ‘Severely’ Out of Balance
Fed Official: Housing Market ‘Severely’ Out of Balance
The “severely out of balance” housing market is greatly hampering the nation’s economic recovery, and solving the supply-and-demand issues in the housing market needs to be an “immediate priority,” Elizabeth Duke, member of the Board of Governors of the Federal Reserve, said late last week to the Federal Reserve Board Policy Forum during a speech, “The Housing Market Going Forward: Lessons Learned from the Recent Crisis.”
Duke said that addressing the swelling inventories of REOs is critical for helping to rebalance the housing market. An inventory of at least 1 million REOs this year as well as 2012 and 2013 is expected to pass through the market, and “REO properties are weighing heavily on the market for owner-occupied house” and bringing overall home prices down, Duke said.
Duke said that converting a portion of residential REOs to rental units may be one reasonable option for lenders to handle the big wave of foreclosures.
“Such conversions might also be in the best interests of lienholders and guarantors if recoveries from renting out properties exceed those from outright sales,” she said. “Over time, as financing conditions ease and the number of REO properties to be sold declines, the share of properties sold to owner-occupants and sold to investors for rental will adjust commensurately.”
Source: “Fed Duke: Balancing Housing Market Supply-Demand ‘Immediate Priority,” Market News International (Sept. 1, 2011)
Wells Fargo Lowers Conforming Loan Limits
Wells Fargo Lowers Conforming Loan Limits
CNBC Real Estate Reporter
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Patti McConville | Getty Image
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The deadline for ending temporarily higher loan limits at Fannie Mae, Freddie Mac and the FHA is October 1st, but they are effectively ended now.
A Wells Fargo spokesman confirms, “August 15th was the deadline for applications and rate locks for FHA and conventional conforming loans with balances above the limits we expect will be in place after September 30th.”
The loan limits were raised by Congress in 2008 temporarily from $417,000 to $729,000 in the highest priced markets in order to help bring much-needed liquidity to the mortgage market after the sub-prime meltdown that sent investors fleeing. There has been heavy lobbying by the Realtors, mortgage bankers and home builders to extend the limits, but so far to no avail.
Even though the rule goes into effect on October 1st, all loans have to be funded, sold and shipped to the GSE’s by then. Refi volume has been so high lately that it can take 45 days to do a loan, so lenders have to cut off in time.
What does that mean on the street? A check of Wells Fargo’s website shows it offering the 30-yr fixed conforming at 4.25 percent, and jumbos at 4.625 percent. Obviously the rate changes will affect only the highest priced markets, largely on the coasts. This from mortgage expert Mark Hanson:
“The realists note that within certain mid-to-high end communities, which can underpin an entire county’s economy, the majority of houses and borrowers could be impacted, again weakening the macro economic foundation.
Bottom line: The loss of high leverage GSE and FHA loans to $729k will negatively impact mid-to-high end housing. To what extent, I am not sure yet. However, I don’t think it will be trivial. But what I am sure of is that mid-to-high end housing is the segment most at-risk for step-down in sales volume and prices…just look at CA house sales over $500 in July for an example of how volatile this market segment is.”
Buying is cheaper than renting in most U.S. cities
According to real estate web site Trulia, buying was cheaper than renting in 74% of the country’s 50 largest cities in July. In just 12% of the cities, including New York, Seattle and San Francisco, renting was cheaper. In the remaining 14% of cities, renting was less expensive but close to the cost of buying.
In addition to a continuing decline in home prices, rock-bottom interest rates have added a lot of weight to the buy side of the scale. The overnight average rate for a 30-year fixed was just 4.19% on Monday, according to Bankrate.com. A 15-year fixed averaged just 3.43%.
Add in the tax perks of home ownership and for those who can afford it (and who can actually qualify for a loan), it certainly is a buyer’s market.
“It’s a personal decision, of course. But if you have a steady job and you are planning to stay for seven years or more and have enough cash to put 20% down and enough left over for seven or eight months of expenses, you’re better off buying in most places,” said Daisy Kong, a spokeswoman for Trulia.
Las Vegas offered the most compelling buy-side math, Trulia’s survey found.
Prices there have plunged more than 59% from their August 2006 peak, according to the S&P/Case-Shiller home price index.
The median price of a two-bedroom, two-bath condo or townhouse is about $60,000, according to Trulia, a ratio of only six times the median annual rent of a similar rental apartment, which is $9,700.
Monthly mortgage payments on a median-priced Vegas condo would come to only $256 on a 30-year, 5% interest loan. Even factoring in property taxes and common charges of roughly $300 a month, the monthly amount is still much lower than the $810 in monthly rent they would pay on a similar place.
Detroit, according to Trulia, is another metro area where buying is better. The median price for a condo or townhouse is about seven times annual rent. Home prices in Mesa, Ariz. and Fresno, Calif. also clock in at seven times rent.
Arlington, Texas, Sacramento, Calif., Phoenix and Jacksonville, Fla.all had buy-rent ratios of eight, Trulia said.
Even though rents average $2,980 a month in New York (the highest of any of the 50 markets), it’s still the best city for renters, according to Trulia’s survey.
Paying for the same kind of two-bedroom Manhattan apartment would cost 36 times as much, nearly $1.3 million.
Big money towns
One surprising place where renting is cheaper is Ft. Worth, Texas; buying exceeds renting costs by 32 times. Part of the reason is there are relatively few condos in the city and they tend to be upscale and costly. That, combined with low rents of about $9,500 a year, make renting cheaper.
Omaha, Neb., where buying is 27 times annual rents, Seattle and San Francisco, which both clock in with purchase prices that are 24 times rents, and Kansas City, at 22 times rents, are other places where renting makes financial sense.
The buy-rent calculation is just one part of the decision-making process. Other factors include:
- How long you plan to stay. If you’re not keeping the home for several years, transactional costs of buying and selling (e.g; commissions, closing costs) can wipe out any buying edge.
- Whether you have cash for closing. It’s not easy to find banks willing to lend more than 80% of the cost of a home. That means buyers have to come up with 20% down, plus closing costs. On a $200,000 home, that’s $40,000.
- Whether you can cover all the homeownership costs. It’s not just the mortgage: There are property taxes, insurance, heat, utilities and regular maintenance.
- Whether you can claim the tax advantages of homeownership. Mortgage interest is deductible and can shave a lot off tax bills but this benefit accrues mostly to high income earners with substantial mortgage payments. Many borrowers claim the standard deduction on their taxes and so derive no savings from the deduction.
Even where it’s cheaper to rent, it doesn’t necessarily mean renters will come out ahead, according to Ken Johnson, a real estate professor at Florida International University and co-author of a new study on whether it’s better to buy or rent.
“Paying off a mortgage is a kind of forced savings,” he said. Each check homeowners write lowers the balance they owe and increases the value of their property holdings. That, unlike cash in a bank account, is not easy to tap.
Where the jobs are
Homeowners have to go through a lengthy and costly process to access it by taking out a home equity loan or a cash-out refinance — actions they tend not to take unless there’s a specific need.
Depending on where they live, renters may save on monthly expenses but, unlike the forced savings of mortgage payments, they won’t have anything to show for their monthly payments in the way of savings.
Ultimately, however, the decision whether to buy or rent depends on each person’s situation and their plans for the future.
While buying a home may be an attractively cheap option these days, many mortgage holders have found out the hard way that the joys of homeownership can turn sour should the unexpected strike.
How to Enter a Room and Network Like a Pro
*I came across a great article I’d like to share with everyone…*
So, we’re assuming you’re on time and you know why you’re there and you know exactly what you want from the people in the room and you’ve Googled them and found out where they went to school and that according to LinkedIn they made a couple of questionable professional moves in the early ’90s and at least two of them tweet. What we’re interested in is that pregnant series of moments that lasts for around a minute and is ostensibly about introductions and handshakes and the offering of beverages and, if you’re lucky, a Danish or something, but is really about the beginning of potentially important relationships.
The main problem with entering an unfamiliar meeting room is that it’s like leaving a bar when it’s still light outside. Things seem a little too bright, a little overwhelming, a little disconcerting. Yet no matter how thrown off you feel, the guiding principle is: It’s your room. For the next, oh, 30 seconds to a minute, you’re in charge. Even if it’s their room, you’re in charge. Even if your earnings are a 10th of the salary of that guy you’re about to shake hands with, you’re in charge. You’re not the only one determining the mood of the room, but you have to take responsibility for it.
Consider a lesson from the forest. “Pretend everyone’s a bear in the woods,” says Robbie Pickard, a Santa Monica, Calif.-based comedian who spends his career entering rooms full of people he needs to impress. “If you look scared, the bear is going to attack you.” Which we always thought involved yelling and waving your arms and stomping the earth and throwing a Coleman lantern. But what he’s saying is, offer no apologies or expressions of trepidation or false humility. Protect yourself with confidence. Confidence makes you look comfortable.
It should seem like there’s no other place in the world you’d rather be.
1. WHEN people introduce themselves, say their names back to them or take a mental note. But try to keep their names in your head. Saying a person’s name back to them 20 or 30 minutes after you’ve met them suggests graciousness and respect, and it will endear you to them.
2. DO NOT give out businesscards before the meeting begins. Because it makes you look like a blackjack dealer.
3. LOOK everyone in the eye for, like, a millisecond longer than is comfortable.
4. Don’t carry yourself in a way that could be described as “jaunty.”
5. IF there are fewer than six other people in the room, shake everyone’s hand. If there are six or more, shake approximately five hands, and then nod amiably to the rest. The shaking of hands can get out of hand.
6. At no time say, “Let’s do this!”
7. NO fist bumps.
8. DON’T talk about anything that isn’t pleasant, such as how much traffic you were just in or how hot it is or how you have a cold.
At this moment, more than any other moment in the meeting, you’re your own agent. You’re saying, “I’d like you to meet myself.” (Note: Do not under any circumstances actually say, “I’d like you to meet myself.”)
Bill Clinton is a useful example. The man knows how to enter a room. He might not know how to leave, but he knows how to enter. Two out of the two former press secretaries we called for help with this column (we figured they might know something about the subject of entering meetings, since they’ve seen people enter the most important rooms in the world) mentioned Clinton as the best room-enterer they’ve ever seen. Which is pretty easy to do when you’re the president of the United States, but still, there are lessons in his approach.
“When Bill Clinton entered a room, he owned the room from the second he walked in,” says Dee Dee Myers, Clinton’s first press secretary and now a managing director at The Glover Park Group, a D.C. communications firm. “Because he was curious, he wanted to talk to people and would totally engage them. And pretty soon all the energy in the room was running in one direction.”
Marlin Fitzwater, press secretary for Ronald Reagan and George H.W. Bush, says, “Bill Clinton was probably the best I’ve ever seen. He walked in and demanded the attention of everyone. The lessons of Clinton are: Don’t be aimless, don’t be casual, don’t be flippant. Let your audience know they’re important and that you’re there because you have a message to give them.”
So, it’s an act, yes. But it’s not entirely an act. The act is supported by an important psychological underpinning: actual curiosity. “You have to be curious,” says Thomas Huseby, managing partner at Seattle VC firm SeaPoint Ventures. “Most entrepreneurs are thinking about what they want to teach or what they want to convey, and everybody would much rather talk to someone who is curious. It’s amazing what that attitude does.”
That’s how to enter a room. With curiosity. But not necessarily about the business at hand. Meetings at Esquire often start off with questions about the view from our conference roomon the 21st floor of the Hearst Corporation tower in Midtown Manhattan. If the person we’re meeting with asks anything at all about the city, we take them over to the window and give them a quick tour: the Empire State Building, the exact location in the Hudson where Captain Sully landed the plane, that statue of Ronald McDonald that somehow ended up on the roof of a four-floor walk-up on Eighth Avenue, how New Jersey looks vaguely bucolic if you squint. It’s a rich, interesting conversation.
Who wouldn’t want to be in a room with you now? You’re amiable and confident and pleased with the way things are going. You’re ready to talk and to listen. You haven’t given them any reason why they couldn’t see themselves giving you a lot of money or offering you a contract or partnering with you in some way. You’re someone they could see themselves doing business with, is what we’re trying to say.
All that, and you haven’t even sat down yet.
Have a question for the Esquire Guy about how to comport yourself at work, on the road or maybe in a bar? (or even at work in a bar on the road?). Ask it atAskesquire@entrepreneur.com.
Housing Reality TV Refocuses on Foreclosure Makeovers
House-flipping reality TV shows that took advantage of a booming housing market soared in popularity a few years ago. But now these shows are getting a new dose of reality by taking on foreclosures.
Foreclosures, which have skyrocketed across the country, will become the new focus on many real estate reality TV shows slated for later this summer and fall, airing on several TV networks.
Here’s a rundown of some of the shows:
“Flip Men”: Spike TV will premier a show in September about two hosts in Salt Lake City who attend auctions for foreclosed homes and try to make money in the foreclosure market.
A&E Television Network: The network plans to have a new show about flipping homes, some of which are in foreclosure, in the Houston area.
DIY Network: The network has a show in development about flipping foreclosed houses that is slated for 2012.
“Flipping Out:” The Bravo show, which is in its fifth season, will start tackling more foreclosure topics with host Jeff Lewis, a house flipper turned designer, working with lenders to try to buy a foreclosed home.
Lewis says he expects “more and more” reality shows to debut about foreclosed homes. “People want to watch programs that reflect the current reality, not a fantasy,” Lewis told The Wall Street Journal.
Source: “TV Home Shows Flip Scripts,” The Wall Street Journal (July 25, 2011)
Read more: A Foreclosure Gets a Dramatic Makeover
Short sale fraud plagues the housing market
By Les Christie July 14, 2011: 4:26 PM ET
Later that same day, the new owner — an investment group owned by another real estate agent — resold the home to a buyer who had been lined up before the short sale transaction went through. The final sale price: $132,500, netting the seller a cool $30,000 — a profit that should have gone to Regions.
In this latest twist on short sale fraud, scammers have found a way to rip off mortgage lenders by tens of thousands of dollars — sometimes in a matter of hours.
The scam artists, usually real estate agents, will secure a legitimate bid on a home, one where the borrower owes far more on the mortgage than the home is worth. Then they arrange for an accomplice investor to make a lower offer on the home.
Foreclosures for sale: Big supply, low prices
The agent then presents the lower bid to the lender and asks them to forgive any remaining balance owed — without disclosing that there was a higher bid made on the home. Once the short sale is approved, the scammer then sells the home to the higher bidder, often on the same day.
“These same-day resales are on average nearly $50,000 greater than the lender agreed upon short-sale price,” said Tim Grace, senior vice president of product management and analytics at CoreLogic (CLGX), a financial analytics company based in Santa Ana, Calif.
Such transactions are expected to cost lenders more than $375 million this year, up more than 20% from last year, according to CoreLogic
Most of the time, pulling off one of these scams involves a real estate agent and an investor acting as a “straw buyer.” Sometimes, the owner of the home is involved as well, but not often, said Robert Hagberg, an investigator for the mortgage giant Freddie Mac (FMCC, Fortune 500).
“In most instances, the sellers are apathetic; they’ve, basically, already lost their homes,” he said. With nothing to gain or lose, they allow agents to handle the entire deal.
To get the banks to approve low bids, appraisals or broker price opinions are manipulated. Home prices have plummeted in many housing markets and the house may be worth far less than what the seller paid.
Sometimes, said Hagberg, fraudsters bribe appraisers or brokers to get the prices they want but they can employ sneakier methods as well. One method: Misstating the home’s location so it’s compared with much cheaper places.
One case in California last year involved an expensive Malibu property that the agent said was in Riverside, Calif.
“It didn’t cause any alarm bells to go off at the bank,” said Grace. “The short sale went through at $200,000, which was a fifth of its value. It was turned around for $1 million.”
Sometimes an agent will point out every defect in the home to get appraisers to reduce their values, according to Hagberg. In Wisconsin, an agent left the windows open during spring rains and flooded the basement. He told the appraiser the plumbing burst and would need expensive repairs. All it really needed was a pump.
“When the flippers say there’s something wrong with the electricity, the plumbing or the roof, the appraiser can’t tell whether they’re being deceived or not,” said Hagberg.
Five years ago, when the housing market was thriving, lenders rarely heard of a short sale fraud. But as the housing market crumbled and beleaguered homeowners increasingly turned to short sales to get out of their underwater mortgages, the frauds increased as well.
Now, 13% of all existing homes sales are short sales, according to the National Association of Realtors. And last year, frauds associated with short sales comprised half of all fraud investigations for mortgage companies like Freddie Mac (FMCC, Fortune 500), according to Hagberg.
The impact of short sale fraud goes well beyond the direct losses to banks. These frauds have become so common, it has become more difficult for legitimate short-sale transactions to go through.
That hurts sellers because it forces more of them into foreclosure. It hurts banks by adding to their costs and it can make all the parties more cautious.
The frauds “defeat why we do short sales in the first place,” said Hagberg.
In the Bridgeport, Conn. scam, two real estate agents were arrested. It was just one of four similar frauds that were listed in their indictment, which netted them a total of more than $180,000. They pled guilty and are awaiting sentence.
They may be out of business but with home prices off about a third from their peak nationwide and down 50% or more in many post-bubble communities, there are opportunities for other short-sale fraud artists to take their place. 
