Posts Tagged ‘san diego’

To turn a foreclosure auction into gain one requires patience and nerves of steel. Recently a seminar was held at Hotel Huntington Beach on foreclosures. The speaker, Hannigan, was a lawyer from San Diego who claimed to have traded in 50 foreclosed properties in 25 years. It is these investments that have made him wealthy. But Hannigan stressed that anybody listening to him would be mistaken to think that the route to wealth via gambling in distressed sales is as easy as it sounds. The prerequisites to end up with a success story are determination and grit. An orator of sorts Hannigan kept his audience engrossed. He stressed that dabbling in foreclosure auction is not child’s play but is a full time serious job.

The investor must first plan what to do with property after having made a thorough search about liens and deeds. A cashier’s check must be ready in case the bidder turns out to be the winner. Then one must be prepared for a shock because properties are often yanked off the shelves at the eleventh hour for many reasons – the main one being an agreement between the lender and borrower. This is all part of the foreclosure game.

Having crossed this zone if finally the buyer does land up with the property then other problems might pop up – the occupants might have to be evicted and extensive repairs might derail the budget.
Hannigan attracted both seasoned investors as well as novices beginning to toy with the idea. Jerry Tagliaferri is new in the field having just recently got a real estate license. The falling real estate market edged him on to try his luck at foreclosed auctions. He has been regularly attending auctions but comments that most of the foreclosed houses hardly get any bidders. It then becomes REO or property of the lender. The few units that do have some equity left over and above the loaned amount are fiercely fought over. Tagliaferri was lucky to win a four-hour free discussion with Hannigan. The latter usually charges $250 by the hour while training.

Another listener was Jim Pollina who drove down from San Luis Obispo County to listen to Hannigan for the third time. He was amazed to note that many people slipped into foreclosure even when there was equity on the house. The point is to spot these goldmines.

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It seemed as if a big party on. Cars rolled in on a foggy Sunday April morning in downtown Riverside. Men in tuxedos guided the traffic. Now that was unusual! People shopping for real estate bargains tumbled out in dockers, sandals and shorts. Don’t let the casual dress code divert your attention. These were all serious shoppers with pockets bursting with cash and checks – perhaps to the tune of millions of dollars.

Who were they? There were investors from San Diego on the look out for an inexpensive property to rent out. Some were novices from Fontana hoping to save a whopping $200,000 on a family unit. Many others came in droves for auction sales of foreclosed houses. California has not seen the likes of this type in decades. On this particular day, two lenders had put 100 properties on the dock. 93 had been sold off before the end of the day. Most of the properties were in fast growing ex-urban and desert areas on Riverside and San Bernardino Counties lying to the east of Los Angeles.

Till the other day the company holding the auction had been a nonentity in the field. Bu during the last few months when mortgages fell and foreclosures rose many lenders brought them back to business from hibernation. It was well worth it. They sold 265 properties in San Diego, Los Angeles and Riverside during only two May weekends. Upbeat, they are planning a repeat performance in Sacramento, Modesto, Atlanta and the Bay region, this summer. The spokesperson of this company described this as ‘counter-cyclical business’ but he refused to disclose the names of the banks involved. He admitted that in some cases the properties were sold for less than what were due in terms of loan. It was a gathering of rain and shine for what was one man’s meat was poison for another. The losers were none to happy but they would rather face losses quickly than linger on it with no hope in sight.

The tuxedo boys were not only outside conducting traffic but also inside the convention answering and guiding people around. In the opposite hall there were 41 loan and 25 escrow officers. Speakers were loud on the soundtrack. Extra chairs were wheeled in. From the bonhomie at the party it did not seem that the process of auctioning foreclosures in California is usually painstaking and time consuming.

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Investigators have stumbled upon a racket known as inflated-sale-and-crash schemes in which countless have fallen victims. The buyer in collusion with shady real estate dealers buy a home at more than the current market price, receives cash at the closing of escrow and then intentionally allows the property to fall into a foreclosure. 400 such cases have already been traced. In a couple of months the dealers have pocketed more than a million dollars.

Lackner, an appraiser since 1989, while investigating a property in San Diego suddenly noticed that one had been sold at $70,000 more than the listed price. He quickly did some spot-checking and found that the property was rundown and vacant. He immediately smelt a rat and began checking on the agent who had represented the purchaser. It showed that the man had been implicated in the buying of 17 other properties over a period of few months. All the deals looked suspicious. Out of these 10 were subsequently foreclosed.

Lackner set to work and turned over the documents to federal and state investigators. In an email to North County Times, an FBI official, without being specific, said that mortgage frauds have become a regular problem requiring the FBI to team up with other law enforcement agencies to brook the culprits. It is the main priority area of the FBI because it has an overall impact on the economy of the entire nation. Within two years from 2004 the number of reported cases has doubled from 17,127 to 35,617. It points to losses over $1 billion for the owners. The crimes are netting in far more than what an average bank robber pockets - $5,000! It amounts to robbing 10 to 20 banks per day. Appraisers and agents are hand in glove in this crime. The ill-gotten gains are then split between the two crooks. The game plan is that the buyer stops paying mortgages after a couple of months. The bank declares default and takes steps for foreclosure and dispossession of the owners.

The real sore point is that neighboring property values rise. But foreclosed homes are sold at less than the current price causing an opposite effect of real estate values in the area. California is credited with having more than one third of the nation’s suspicious loan activity. Most frauds surfaced during the middle of 2006.

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According to recent studies on the San Diego real estate market, the foreclosure rate has risen 219% between July 2005 and July 2006. County records statistics show that in July 2005 there 345 properties in default in the city, whereas in July 2006 there were 756 homes in default.

As in other parts of the country, this trend is attributed to a number of causes including predatory lending practices, aggressively rising interest rates, and little or no money down adjustable interest rate loans. When homeowners get locked into loan deals that may at first seem to their benefit, such as ARMs, they often find that once the rates start rising, they are stuck with extremely expensive mortgage payments. On top of this, the decline in the demand for housing as well as property values has led to many citizens being unable to sell their homes to get out of their situation. Unfortunately, default on payment and subsequent foreclosure then becomes a very real possibility.

According to HUD and the Center for Responsible Lending, a national watchdog organization, predatory mortgage lending involves a wide array of abusive practices including excessive fees, abusive prepayment penalties, kickbacks to brokers, loan flipping, and unnecessary products and add-on fees. HUD warns that while many people believe these loan practices target only lower class homeowners, the incidence of predatory lending with middle and upper class homeowners is on a quick rise.

If you feel you have become the victim of predatory lending, be sure to visit the HUD website for information on who to contact for help.

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