 Tuesday, September 23, 2008 ( 10:53 AM ) Andy Mortgage Fraud - Is the smoke Going to Clear As mortgage lending slows, the smoke should begin to clear, exposing more of the mortgage mess. It will give us a chance to slap our heads and wonder how much better off we'd be if we just had a V8; case in point, WaMu. In July 2007 Vijay and Supriti Soni bought a home for $440,000 in Santa Ana, CA. Five weeks later, while prices were falling in the area, they sold that property for $660,000 to their gardener and handyman. WaMu made both loans. The property was actually worth $377,137 when foreclosed in July 2008. In all, it is reported that the Soni family had 43 mortgages with WaMu for $24.5 million since 2007. 22 have sold but six of them are problems. Four were foreclosed on, one is in default now and the sixth is up for sale at a $260,000 loss. WaMu's has $2.7 million in problem loans from this bunch. Property values have fallen more than 40 percent in the Santa Ana area since the 2006 peak. The public records on 22 of the Sonis transactions show that in the past two years they had a total gain on sale of $3.7 million. They never had a property loss. Their average gain was 48 percent and flips were completed in 92 days. Some of these flips went from one family member to another. And the transaction was used as a comp on another of their flips to support rising values in the area. There is also doubt about the down payments that were supposedly made by buyers. In one case the buyer said he paid nothing down, but the records show $64,200 was paid. Lohia Soni was the escrow agent. WaMu is investigating the loans as mortgage fraud. At what point would red flags have gone up and more attention been given at your bank? The FHA banned financing flips less than 90 days after a sale. WaMu wasn't following that rule here. The FHA also requires second appraisals when there is a 100 percent gain on sale after less than six months. The Sonis also had convictions for real estate fraud in 2003. I can't wait until the next season of Flip this House comes on. That will be reality TV. # |
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