The Elephant in the Room: Looming Foreclosure Epidemic
At industry events lately, real estate professionals gather to talk shop and discuss market trends for 2007, but I notice that nobody’s talking about the elephant in the conference hall. We’re predicting the health of the market. We’re exploring new technologies. We’re trading secrets. We’re swapping ideas and business cards. But the silence over what I believe is a looming foreclosure epidemic, is deafening. Nobody utters the words “flipping,” “fraud,” or “foreclosure.” It’s almost as if these three words have been banned from the industry.
I’ve attended dozens of conferences, and very few of them schedule sessions devoted to real estate and mortgage fraud. The topic tends to have more of a following at conferences for mortgage bankers. Perhaps real estate professionals are simply too busy helping their clients buy and sell houses, or they find the topic less stimulating than others.
By not paying sufficient attention to real estate and mortgage fraud, however, we’ve become blind to the fact that illegal flipping, cash back at closing, and other forms of real estate and mortgage fraud are chipping away at the very foundation of the real estate industry, leading to shameful foreclosure rates that only promise to become tragically worse. While we’re discussing lead generation, marketing techniques, and the power of blogging, absent from our discussion is any mention of what to do to protect the homeowners, our clients-the people who butter our bread.
What is currently happening in the real estate and mortgage industry can only be described as the perfect storm. Fraudsters are ripping off lenders and homeowners with impunity. Artificially inflated housing values are soaring, and with them, so are property taxes and insurance premiums. Lenders are losing billions to fraud and then turning around and ripping off homeowners by selling them adjustable-rate mortgages and other high-interest loans they can’t possibly afford. And personal income just isn’t rising fast enough to keep up with the market. Strapped-for-cash homeowners are beginning to use their homes as ATMs, mortgaging themselves into foreclosure and bankruptcy.
Yet, few real estate professionals express any concern. They continue to carry on business as usual, and often “business as usual” includes actively participating in the fraudulent activities that threaten the American Dream of homeownership. In fact, the FBI estimates that 80% of all real estate and mortgage fraud involves industry insiders!
We need to turn these numbers around in a hurry before our entire industry collapses. We need to wake up and realize that our clients-average homeowners-are hurting. We need to recognize that fraud is destroying the very industry that feeds our families and that it directly contributes to the rising foreclosure rates around the country. We need to educate ourselves and our clients, and then take action to spot, stop, and report and post fraudulent transactions that we witness, regardless of whether the person committing fraud happens to be a client, colleague, friend, or family member.
If we fail to take action now, none of us will have the right to complain when our children and grandchildren cannot afford to purchase a house, when our friends and relatives have their homes stolen right out from under them, and when our businesses crumble because the average citizen cannot afford a home.
I would like to see future conferences focus a little more on that elephant we all seem to be ignoring.
A Ralph Roberts Site, Copyright 2006 | 
It sickens me to realise that this talk needed to be given to roomful of alleged professionels in their fields. How, in God’s name, can a business that relies on serving the public get away with such obvious disrespect and remain in busness? I have read the Realtor Code of Ethics. It is the same code that ANY employer of ANY personnel, be they busboys, cashiers, or custmer service reps, demands from an employee. It is simple common sense! “The customer is always right even if they are dead wrong.” was not coined by politicians or legislatures. The mafia enforces a code ethics just as a department store chain because they understand who it is that allows that business to be profitable. The real estate industry is an untouchable comparable to politicians and school teachers. They are left to policing themselves and answer to nobody. If these “adults” to whom you are speaking too must be taught basic courtesy this late in the game, they deserve all the flack from every angle and get no respect from me. You like to rate youselves as well. Compare your “Profession” with folks who sell cars for example. You should not compare yourselves against people that do not have to told how to treat a client as they know and cusomer protection laws and lawsuites keep the scammers and criminals in check. This can not be said for real estate industries who walk hand in hand with politicians and have PACS to secure them no matter how they behave. Face reality. Now that vultures have flown home, start policing your rank and file knowing you reap what you sow! Danielle Von Tungeln
Comment by Danielle Von Tungeln — February 17, 2007 @ 4:01 am
Thanks for the article on Elephant in the room
I’ve been eagerly looking for someone to tell it like it is. My recent experience buying a home led me to conclude that the entire real-estate industry is really corrupt. When loan officers are on the phone trying to convince me to falsify income on Fanney Mae, somethings wrong.
It’s hard to find anyone who is saying it is in real trouble.
It seems to me that NO ONE except the buyer has a an interest in saying we are headed for trouble. If you know of any place I could get real info on the real estate market, I’ld appreciate it. I’ve been warning several friends they shouldn’t buy for a couple of years ’cause it doesn’t look too good.
Thanks again for the article.
I appreciate that someone is speaking up.
John R.
West Allis, WI
Comment by John R. — June 11, 2007 @ 4:07 am
Excellent article.
I myself was the victim of a scam involving a sham buyer’s agent who took advantage of my ignorance of abstruse dual agency disclosure regulations to shift roles at the very last minute to become an agent for the seller of a house of choice (in Maryland).
To learn more about the lawsuit that i brought against a major real estate company for consumer fraud, go to Google and type in my name “Joel Stern”, then “Weichert”; you’ll find quite a few blogs and websites that cover this problem.
Dual agency in any guise is legalzied fraud and should be abolished.
Comment by Joel Stern — June 19, 2008 @ 2:36 am
I have sold my house through a Realtor X, using agent A.
Buyers use agent B, from the very same Realtor X.
Transfer took place through Conveyancing Lawyer Y.
Mr. X is also the owner of the Franchised Realtor, which employs a large number of individual agents, including agent A and B.
Whilst these agents work independently, they collectively use the secretarial, sales and marketing services of Realtor X.
Commission is shared with the Realtor and, as it happens, with other agents.
Buyers were unable to cough up the purchasing price.
I therefore offered them an interest bearing loan over the missing amount.
The contract was drawn up by the Conveyancing Lawyer’s office, on the letterhead of the Realtor X.
Payments to be done in installments, whereby buyers agreed to pay off as soon as possible, but no later than within 36 months.
By the time the last payments were due, buyers refused to pay the outstanding interest.
Naturally I contact my Agent A, who became evasive.
Conveyancing Lawyer Mr. Y agrees that my explanation is plausible, but unfortunately he can’t be of assistance and suggests to take a lawyer.
By coincidence I find out that the buyers have decided to put their house on the market again – just around the same time of the argument with the buyers of my house.
Guess who their agent is: Agent A, from Realtor X.
Conveyancing Lawyer happens to be, you guess correctly, Mr. Y.
They are about to collect the equivalent of USD 30.000 on commissions. So why would they bother with the outstanding USD 2.000 the buyers owe me?
What bothers me is the clear conflict of interest.
In my case the outstanding amount is USD 2000. But with the next ‘victim’ it could be 50.000.
Now HOW do I sort this out.
If I want to report the agent and the lawyer’s, where do I go?
And what are my chances?
Can I claim the outstanding on the agent?
Comment by Peim — August 1, 2009 @ 8:25 pm