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June, 2006

Mortgage Fraud in Aurora

by: Philip G Rice, Certified Residential Appraiser, CPA, MBA

Absorption

Aurora South (AUS) Residential (houses) - 3,880 sales in the past 12 months = 323 per month. 1,985 active listings = 6 month supply. Condos (including townhouse) - 1,639 sales in the past 12 months = 136.5 per month. 1,346 active listings = 10 month supply.

In plain English - if you want to sell a house in Aurora, it's going to take 6 months. If you want/need to sell in less than 6 months, it better be priced aggressively and/or you better have a good real estate agent. For a condo, it will take 10 months. If you're in a hurry to sell a condo or townhouse -- good luck.

MKG Appraisal FoaF, OPML, RSS Feed, Business Card - scanned image, vCard file.

06/22/06

Short Sale

6347 S Fairfax Way, Centennial, CO 80121

There is nothing unusual here - in fact this is a very common occurrence.

In April of 2004, Tim & Sara Schwankl step up and buy a house. The asking price is $225,000. They agree to pay $219,700, but only if they can arrange a $221,523 loan. The "lender" is listed as " WR Starkey Mortgage, LLP". Looks like Starkey sold the loan to Chase Home Finance - a/k/a "Sucker".

Before long the Schwankl's stopped making the payments and the property goes into foreclosure. Somehow, either the lender or the Schwankl's hire Jeff Brouk as real estate agent to sell the property as a "short sale". Even though they can't net enough to pay off the loan, it's still better if the homeowner agrees not to trash the place. And the sooner they sell the better. It cuts down on carrying cost and legal fees. Ask anyone in the business, there are a lot of short sales in Aurora and all over the Denver metro area.

On May 3rd, 2006 Jeff Brouk lists the property with an asking price of $199,500. Two days later, they get a full price offer. A month and a half later, the property is still listed as "under contract", but Jeff tells me he cannot get the lender (whoever that may be) to approve the sale.

The sale is in limbo.

06/20/06

Vicki Dillard Crowe

16 houses since July 2004. The latest:

45 S. Garfield St, Denver, CO 80209

Brand spanking new home bought from the builder on 05/17/06. Purchase price (per MLS) = $1,380,000.

Fraud = $unknown, maybe none. It could very well be that Ms Crowe told the truth on the loan application and bought this property on the up and up. Maybe she is making plans to move in and make this her primary residence. She has to live somewhere. Why not here?

Loan amount = $unknown. Lender: PHM Financial Services, 303-393-5926. Turns out it's getting harder to sell a Vicki Dillard Crowe loan.

Listing Agent = Elyse Gordon-Holtz, PC050 Prudential and/or Jennifer Gore Unlimited.

Selling Office = 00513 = Colorado Choice Properties.

06/14/06

Buy a house and get $10,000

3325 S Hannibal St, Aurora, CO 80013

The sign says "up to" $10,000. I called the listing agent and asked about the yard sign. David Dumas says when you buy the house, he pays a secret amount of money into a fund, which is administered by Cash Rewards, Inc. Somehow the company called My Home Rebate is involved. If you fill out the paperwork and follow all the instructions, and wait 3 years, they give you "up to" $10,000.

They have a website, so it must be legit. What could possibly go wrong?

-- end of item --

06/13/06

This Place is a Dump

Click the image to see full size view.

I took this photo 5/31/06. This is a garbage dump. Located in the front yard of a lender owned property. Saddle Rock Ridge, one of the top neighborhoods in Aurora - nearly everything in this neighborhood is priced over $300,000. This neighborhood is not ghetto - not yet. Sooner or later the lender or the real estate agent will get busy and pay someone to haul away the garbage. Right?

-- End of item --

06/12/06

408 Empire St, Aurora, CO 80010

The above "Notice of Violation" is/was posted on the front door. Click on the image to see full size.

Lender Owned. So who mows the lawn? It's not so bad if it's just one or 2 properties. But if there is too much of this stuff, the whole neighborhood looks ghetto, and property values go down. 305 Empire, 320 Empire, 408 Empire, 424 Empire, 556 Empire, and 588 Empire are all on the foreclosure list.

Who's job is it to make sure the lawn gets mowed and the trash picked up? If the real estate agent is responsible, does it surprise anyone there is a problem? How does it come to this?

In February 2003, the asking price is $182,000. The selling agent, from Paisano Realty, arranges for Maria Rosa Garcia to buy the house for $178,000 with a 102% FHA loan of $182,000.

A year and a half later, in November 2004, Aegis Mortgage somehow manages to refinance this property at a smooth $200,000. Maria Rosa Garcia stopped making payments in about May of 2005. Aegis takes possession, and puts the house on the market in March, 2006. I saw the inside of this property, and it is/was in very rough shape. Aegis sold the house for $140,000 with a $4,350 concession. The sucker who got stuck on this mortgage lost about $80,000 on a $200,000 investment.

The whole neighborhood pays the price. The people who live on this block and in this neighborhood are getting screwed, because Aegis and Dan Ruth (the listing agent) don't mow the lawn and don't pick up the trash.

06/09/06

$31,500 Decrease in 10 Weeks

IMHO - the real estate market on the west side of town is not so bad. Aurora and the east side of the market is where things are worst. Both articles in the Denver Post suggest/imply the problems are in the low end and the ghetto neighborhoods. I disagree - I see the entire range of neighborhoods dominated by foreclosure, short sale, REO properties.

For example, I appraised an REO property at $357,500 in mid March. 10 weeks later I valued the same property at $326,000. That is a decrease of $31,500 in 10 weeks time. Any questions?

Was I too high in March? Am I too low now? Is it possible I was right both times?

I found sales in the past 12 months to support the higher value ($357), including one sale on the same block. When I looked at the competition, I found 3 active listings of comparable properties priced $320, $325, and $330. I asked myself, why would anyone pay more for the property I am appraising?

When I see 3 competing listings, I conclude the market has moved. This property is on the market now. Time will tell.

-- End of Item --

Editors Note: It’s been about a year since I became active and vocal about appraiser and mortgage issues in Aurora, CO. To make a long story short, my attitude is changing. For example – when it comes to mortgage fraud and law enforcement – I have more or less reached the limit of what I am going to accomplish. About 9 months ago I publicly predicted a "train wreck" for the Aurora mortgage market, and made a good faith effort to stop it. Whatever is going to happen is going to happen. I have no interest in publishing the same story over and over again.

What is my point? This may be the last email you get from me. The operative word here is “may”. As always, I may change my mind. My plan is to do what makes sense in the circumstances.

Having said that – I will continue to publish a “blog” (a/k/a RSS feed). You have plenty of options -- my blog should be available to any RSS reader. You can download from Pluck the RSS reader I use -- it's a free download. If you are unwilling or unable to read a blog, your other option is to visit my Website. All of the entries are posted and available to anyone via regular Internet browser.

06/08/06

Panic

Regarding changes in financial markets, my older brother (a smart man) says:

They don't ring a bell.

When the Denver Metro Area (and Aurora in particular) real estate market goes from flat to decrease and then (maybe) to sharp decrease to free fall, it's not like someone is going to ring a bell and everyone will find out at the same time or even agree there is a "problem". It does not happen at one specific point in time, and even if it did, people find out and come to grips all at different times and in their own way.

So what is my point? I'm glad you asked.

The Denver Post ran a front page article last week (Friday June 2, 2006 by Aldo Svaldi) with the headline: "Home Resale Prices Take Dip". Today's Denver Post (Thursday June 8, 2006 by Margaret Jackson) has a story in the Business Section with headline "Housing Inventory Through the Roof". This will have an impact on the perception in the marketplace. In their own way, the Post is trying to ring the bell.

After reading Aldo's article, I prepared a little blurb to include with the essay portion of my appraisals. The draft of the blurb went like this:

Denver metro area re-sale listings at all time high – with demand (number of sales) unable to keep up and moving in the wrong direction. Denver Post 06/02/06 front page article with headline “Home Resale Prices Take Dip”. Home prices are going down, interest rates are rising, and there is a “building boom”....“flooding the market with new homes”. It is highly unusual for the newspaper to publish any kind of negative spin on the real estate market. I see no signs of panic (yet). The months of June and July are normally the last 2 months of the peak selling season.

But as I drove around Aurora, and dug into the MLS market data, I gradually changed my mind about panic. I saw strange/weird stuff, and at first I was not sure what to make of it. After mulling it over in my mind, I'm still not sure what to make of it.

Is that sound I hear a bell, or a slow motion train wreck, or not?

When I do a top down look at the market data (ala Margaret Jackson), I see a slow gradual movement of a few percentage points. Margaret reports that even though inventory (supply) is at an all time high - the median price went up slightly in May. Steve McGuire of Re/Max Professionals in Highlands Ranch is quoted "We might be starting to run into the law of supply and demand". Mike Rinner (a real estate analyst) says "Supply and demand are more out of whack in neighborhoods that are older and farther from jobs...". These 2 "experts" are saying supply and demand may apply in Denver, and it may be out of whack, depending on how far you have to drive to work. Any questions?

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