From the Daily Reckoning Ezine April 10,2006
“Home is where the fraud is,” reads a recent headline on CNNMoney. Everything in nature matures, ages, degrades, degenerates, and deflates – even a real estate bubble. Near the end, the parasites, swindlers, and scammers are in the news. When the tech bubble blew up, for example, the papers were full of stories about dot.coms without even a Web site. No assets, no business plan, no customers, no staff, no clue…not a prayer.
Yet, they raised millions of dollars from hopeful investors, just before they unraveled like a cheap suit.
Thus, we keep a close watch on this house of ours. We keep our eyes wide open at all hours…
Because when America’s houses go down, so goes the U.S. consumer economy with it.
Not that it is a goner, although a report from the Financial Times tells us that the New York City property market is “cooling.” But, now we’re reading about property swindles, such as the one we mentioned in our lead.
“Fraudsters will find novice real-estate investors and convince them to sell their good name and credit record. In return, scammers promise to arrange a loan on an investment property, find tenants, make mortgage payments and sell the property for huge profits once it appreciates,” reports CNN MONEY.
“Instead, the fraudsters use the borrower’s name on loan documents – and then walk away with hundreds of thousands of dollars in loan proceeds.
“‘No tenants are found, no rental payments are collected, no mortgage payments are made, the house goes into default, turns out it’s not worth anything, and the borrower is left holding the bag and their credit is destroyed,’ said Rachel Dollar, an attorney in Santa Rosa, Calif., who represents lenders in mortgage-fraud cases.”
Last year, this kind of fraud cost about $1 billion – twice as much as the year before, and nearly seven times as much as 2000.
Parasites, swindlers, scammers, hustlers – have we nothing good to say about anyone or anything? Yes, dear reader, as we promised, we bring you good news – below. But, it is a funny kind of good news. It turns out that
the bad news is not so bad after all. Or, to put it another way: eventually, everything is such a swindle that even the swindles are phony. From the report on property fraud, for example, comes a gem: until
recently, the fraudsters were rarely caught, because prices tended to rise so quickly that their phony appraisals were exceeded by actual market prices! The swindlers had to work overtime to keep up with imaginations run wild.
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