Mortgage Fraud Festered Under Housing Bubble, Feds Investigate

In ’05, a small company bought up run-down duplexes in northeast Indiana at $50,000 a pop. Less than a month later, they were selling them for $120,000 to church secretaries, truckers, retirees and factory workers.

“It’s just the worst neighborhood in my township,” said William A. Birkle, a county assessor in Indianapolis. “At one point in time, the police barricaded the neighborhood with concrete so there was only one way in and one way out so they could control the drug trade.”

Now a federal investigation is underway to look into accusations of a network of real-estate and loan fraudsters that have left borrowers with dubious property investments in the neighborhood, as well as potentially permanent black marker on their credit history.

The froth of the housing boom has receded, and now we see the sticky oogjie left in its wake.

Suit Says Neighborhood’s Boom Was Built on Mortgage Fraud” [NYT]

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  1. Sam Glover says:

    This certainly isn’t an isolated phenomenon. Freddie Mac has a website, http://www.dontborrowtrouble.com devoted to the problem. The other side of the problem from flipping is equity stripping, where unscrupulous “investors” descend on foreclosed homeowners and “save” their home by paying pennies on the dollar for the deed.

  2. zentec says:

    Is the permanent black marker of the Sharpie kind, or is it a permanent black marker as an indicator that never goes away. I’m confused by the ambiguity of the statement since I thought the details of a credit report were good only for 7 years.

    But then, I could be wrong; not the first time.

  3. I’m sorry, but any ninny who spends $120,000 on an ACTUAL, TANGIBLE item without ever seeing it with their own two eyes, deserves whatever comes their way.

  4. MsDownshift says:

    I would have put the blame here on the mortgage brokers and the lending institutions for not doing their jobs. Credit, background checks and property appraisals were not properly procured. This is now going to lead to an exceptional high number of foreclosures…then it goes full circle again.