Posted by Frugal on 30th July 2008
This is a story from OC register:
Orange County property records show that on Oct. 29, Jose Castro bought 920 W. Camile from the Bank of New York, which took title to the home after it was foreclosed last year. On Nov. 16, Wells Fargo lent Castro $289,275 for the property.
On Dec. 3, Castro transferred title of the house to Asset Disposition Venture Capital LLC, a West Covina company managed by Sergio Praslin, who signed documents on behalf of the company. Praslin did not return calls requesting comment that were left on his answering machine daily for the past two weeks.
On Jan. 15, Praslin signed the deed selling the property to the Gomezes. Mario Gomez said he was surprised when it came time to sign the papers.
“They lied to us,” he said of the sellers. “They said the house was really $500,000, but when I bought it, the papers said $625,000.”
Gomez said someone else – he’s not sure exactly who – paid the $125,000 down payment.
Documents examined by the Register, including papers in the Gomezes’ loan packet, did not show who paid the down payment.
Emily Ralles, who served as escrow officer in the sale of 920, said she didn’t know or care who paid the down payment – as long as the check was good and the parties agreed to the terms of the deal.
“It sounds to me like the seller helped out,” she said. “If someone gave them $125,000, what’s the problem? That’s a beautiful thing, if you ask me.”
For the seller, the advantage of paying the down payment was getting Wells Fargo to cover the $500,000 mortgage – as much or more than the house would fetch on the open market.
Wells Fargo spokeswoman Julie Green Rommel declined to comment on the Gomezes’ loan, citing privacy concerns. She said a homebuyer is free to receive assistance with a down payment as long as it is fully disclosed.
“In many instances, borrowers are able to use gifts from family members or friends for a portion of their down payment, provided the amount and source of the gifts are documented,” she said.
“I didn’t pay any money down,” Gomez said. “The man who sold it to me said, ‘No money, no problem.’ And later he told me I would get $30,000 for buying the house.”
This property is only worth some $375K maximum (if the original loan was 80% LTV). The property was resold as $625K, with $125K down payment from a “mysterious” person/company. Since $125K is 20% of $625K, it would make the loan to be at “80% LTV”, while in reality, the buyer has no skin, and it’s really 100% financing. The seller got a net of $500K minus the $30K that he shared with the straw buyer. So the seller walked away of $500K – $30K – $375K (estimated property value) – $20K (for remodeling) = $75K profits. The buyer will walk away with $30K, and if the loan later gets reset and become unaffordable. At the end, WellsFargo will probably end up with $500K – $400K = $100K loss on the primary loan again.
Actually, WellsFargo will probably resell this loan to Fannie Mae, which gets bailed out by taxpayers’ money. Fannie Mae will sustain a $100K loss, but in the name of propping up the mortgage & housing markets, it “would be okay”.
You and I are obviously continuing to pay for all the fraudulent scams. These liars continue to roam free, game the system, and pocket massive amount of money at your and my expenses. And we have a Congress, Senate, President, and two presidential candidates, continue to bail out and pay for the mistakes and scams that all these liars have caused.
I think the government should jail all these bankers, appraisers, real estate agents, and fraudulent sellers. Very unfortunately, the eventual effect will be a massive inflation thru a dramatic fall in US dollar, and cause everyone to suffer.