COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary COMBO Title and Securitization Search, Report, Documents, Analysis & Commentary

EDITOR’S COMMENT: So far Developers have escaped the investigations by lawyers, homeowners, Department of Justice, SEC, and attorney general of each state. But like all the other players, they were getting their share of the over-sized pie and without their help the fraud would not have succeeded. We have already discussed on these pages how the developers were sharing in fees including yield spread premiums and other ornate compensation that the borrower either was not told about or which could not be understood by an average buyer or borrower.

But the real essential role that the developers played in the securitization fraud was in the inducement — creating the appearance of a rising market, that was soaring at times 10%-20% Per MONTH allowing unscrupulous appraisers to close their eyes and sign their names to an appraisal they knew was pure BULL-s–t. By fronting as a mortgage brokerage operation and giving the appearance of a legitimate operation and the introducing “lenders” who in fact were simple fee-paid actors at closing, they lulled the borrowers and the others into the feeling that nothing had changed from the good old days when bankers eyed applications with a microscope looking for the risk they would not be paid. They didn’t care. It wasn’t their money they were lending and as long as they got the borrower to sign they go a fee that was outsized compared to the fees paid mortgage brokers before this game started.

The developers for their part were having a field day not just because they were picking up a few points on the mortgage but because they could raise prices past the giggle point and nobody was laughing. They were getting paid 2-3 times what they might have charged in a truly competitive market. But the competition was for signatures not for sales. So they would have zero-down loans, no-doc loans, NINJA loans, dead people loans — anything that would get them funded and on to the next dwelling that was built to last long enough for the neighborhood to be emptied by foreclosures.

Borrowers were actually convinced they were making money by buying the house or refinancing the house. That is why I believe that the reality is that it wasn’t the pension fund that was sold a security (they were sold the promise of a security), it was the homeowner/borrower who was sold a security. As any securities lawyer will tell you —if you are offered a passive return without doing any work in which you will receive income, profit or appreciation, it is a security even if it is a cow (literally).

So it’s time to start thinking about the developers who created the physical infrastructure and on-site mortgage lending operation that completed the circle of fraud. A little probing and you’ll see that they even got a part of the appraisal fee. The case is easy.


Preapproved: Well, It Sounded Good



MELISSA CALDERONE was ready for a fresh start when she made plans last year to move to Florida from New Jersey. Recently remarried, she signed a contract in mid-March on a house to be built in Windermere, Fla., by Pulte Homes, the nation’s largest homebuilder. The neighborhood had good schools for her three children and two stepchildren. It was also close to where Ms. Calderone’s parents lived.

Her local bank approved her for a mortgage. But then a Pulte Homes saleswoman told her that she would get a $4,000 credit toward closing costs if she took out a loan with the homebuilder’s banking unit instead. Ms. Calderone, 38, agreed. She deposited $20,000 in earnest money and set aside $80,000 more for a down payment on the $347,000 house. Her closing date, documents show, was scheduled for late summer, about six months later.

Then her troubles began. Although she had been “preapproved” by Pulte, the company ultimately denied her the loan. Then, contending that Ms. Calderone had defaulted on the purchase agreement by failing to close on time, Pulte kept her $20,000 deposit. The house went back on the market.

“They have my money and the house, which they are selling to somebody else,” Ms. Calderone said. “I have no house and no deposit.”

Asked about Ms. Calderone’s complaint, a spokeswoman for the PulteGroup declined to comment, citing concerns over customer privacy.

But the spokeswoman provided a general statement: “Preapproval does not guarantee the final approval or closing on the transaction, since a buyer’s financial situation can change during the homebuilding process or the buyer may be unable to verify certain aspects of his or her credit profile. If the buyer fails to close on his or her financing for any of these reasons, the purchase agreement allows the seller to retain the earnest money to offset any financial damages.”

But Ms. Calderone is not the only Pulte customer with this kind of complaint. Last year, the attorney general of Arizona filed a lawsuit against Pulte, contending that the company’s mortgage sales practices deceived consumers. That suit cited borrowers who thought, as Ms. Calderone did, that they had been approved for a mortgage when, in fact, they had not been. Those people lost their deposits as well.

“In the earlier contracts there was a 60-day period for refunds,” said Nancy M. Bonnell, the assistant attorney general for Arizona who litigated the matter against Pulte. “It seemed like the disapproval of the loans came after the 60-day period. Then consumers would find out they did not qualify for the loan or rate.”

Ms. Bonnell said that Pulte customers in her case forfeited deposits ranging from $2,500 to $25,000 each.

Even when a customer notified Pulte within the specified refund period, the company did not return deposits, according to the Arizona complaint. Some customers were told they had “prequalified” for a loan at one interest rate only to be charged a much higher rate when the loan came through, the complaint said. One customer was promised a 7 percent mortgage but received one carrying a rate of almost 14 percent, it said. Knowing she could not afford the loan, that customer canceled her purchase; Pulte refused to refund her deposit, the complaint said.

Pulte settled with the Arizona attorney general last August, without admitting or denying wrongdoing, Pulte agreed to pay $1.18 million, including restitution.

Under the terms of her contract with Pulte, Ms. Calderone had 45 days to cancel her purchase and get her deposit back. But as occurred in Arizona, her problems with Pulte Mortgage — indeed her first contact with the loan-processing unit — did not come until well after that period had ended.

E-mail correspondence between Ms. Calderone and Pulte shows that the lending company did not contact her until May 25, 2010 — some 67 days after she signed her contract. At that point, she began supplying documents, like the terms of her child-support agreement with her ex-husband, which was her only source of income.

Over the next three months, she continued to respond to questions and requests from Pulte, even when it asked for materials she had already submitted. Pulte also asked about small transactions in her bank account. Where did a $500 cash deposit come from, Pulte wondered? A wedding gift, Ms. Calderone replied.

AS the summer passed, Ms. Calderone kept supplying documents. But she was growing worried that she would be unable to move into the Windermere house by the Sept. 9 closing date. She was living with her parents, and a delay would mean her children could not attend the Windermere schools, where she had registered them.

During this back and forth, nothing changed in Ms. Calderone’s financial situation. At one point, the Pulte loan processor told Ms. Calderone that questions were arising because of new rules imposed by Fannie Mae and Freddie Mac, the mortgage finance giants. “Then she comes back to me saying ‘You haven’t been divorced for a year yet, so we can’t verify how much income you are getting every month,’ ” Ms. Calderone recalled.

It seemed to her like one big runaround. “I had the income; I had the credit score,” she said. “They preapproved me, and I had a closing date. To me, is seemed like they were looking for a reason not to complete the deal.”

The closing date came and went with no contact from Pulte, Ms. Calderone said. The extension she had received from the local school district, meanwhile, was set to expire on Sept. 23.

On Sept. 13, she received an e-mail from a Pulte representative saying the company was submitting her loan application to its regional underwriting manager for review. “I should know today,” the e-mail concluded.

But Ms. Calderone did not hear about her loan that day. About a week later, she received a phone call saying the loan had been denied. Unsure if her children would be able to stay in the local school, she canceled her contract and asked for her money back. She was told that because she had failed to live up to her end of the deal, Pulte would keep her $20,000.

In early December, after she wrote a letter complaining to Pulte’s chief executive, the company offered her a $10,000 credit on the purchase of another Pulte home. She declined. She and her family are now renting a home in south Florida.

8 Responses

  1. I’ll tell ya folks, this is the saddest chapter in US and most likely global history so far. Chapter 1 and so on.

    Why is it so sad?
    1. Well, it is Americans preying on each other, conveniently insulated behind their various professional facades.

    2. It shows the nature of the beast, even present in a single business, at corporate, or multi-layered corporate scale x government, it becomes it’s own living animal of prey, and no single opposing entity, and especially not a human, can grind the blender to slow once it starts chowing down fellow Americans; a global joke we have become.

    3. The complete lack of any word from commercial land: TV, Cable, news, radio etc. What a sell out, the Titanic just took on a few trillion gallons of blood money, and on the upper deck it’s business as usual, tacos, hamburgers, lipstick, nachos, tattoos etc.

    4. It goes from the dumbo ponzi operator small fry, to the financial center cancer and governmental lie and hopium quarters, all for a few bucks – sad. In 1929, through similar government bungling upon fraud, applying tourniquets to dismembered bodies, band-aids on four inch head contusions, and stitches for decapitados, we had a second world war in no time. Today, it’s much more volatile, and no way will this world skip through what world war, or nuclear grind confusion will mean this time.

    5. As a fractal, it’s indicative of the same greed running through medical science of dollars, insurance, judiciary, sports, entertainment, street gangs, etc. It’s just hard to believe something so systemically present, in much greater magnitudes obviously than will ever be exposed, does not purely equal also a systemic moral decay and drunken greed. It’s a very, very, very bad sign of things to come.

    6. And classic with the pattern, 9 out of 10 Americans is also insulated in the media farming system, being partially untouched, they are not putting it together, what the next 700 days or so will more than likely equal. So many bubbles bursting, it would make Orville Redenbacher take note. Every kernel is due to pop.

    7. It’s just started.

    8. All the legal “action” now, is probably a theatric, largely impotent, and will further retard recovery, but a little scapegoat justice will be served.

  2. I have seen this scam in SC also, There is still lots of building going on down near the coast of SC, because Florida is too expensive and has very high taxes and insurance. Several insurance companies have moved out of Florida and do not do business there anymore, because of the hurricanes. Burmese8@yahoo.com

  3. I pledge all the equity in my firmer home( line if credit taken out to fund 20% downpayment for the lot and build …based on ore approval …. I am enticed and induced watching the birth of my dream home and the equity grow as i slept over the year it took to build … Then I must have a massive reserve to ” qualify” ( no one mentioned this when I was pre approved but they knew I had equity in my firmer home ) I could not sell former home ( market already showing signs of flooded with forsales ) so I pull out remainin equity to qualify for the loan … But get this spin… Who collected on that former home wells Fargo…. Who was the trustee master servicer on the new build that they just foreclosed upon …wells Fargo ( at least that’s what it looks like
    but the chairs moved after purported default if not long befor). Now bear on
    mind thru had oaystubbs and w2 s and access to my credit reporting. They knew or had cause to know exactly what my financial
    position or vulnerability was … They took me to the cleaners and back every dime and asset I thought I had just like thousands if others god I wsnt them
    to be accountible for what they did. They knew every step of the way

  4. Not disclosed during the time of execution by the Ashton Woods “the builder” Ashton Woods “the mortgage company” and Wells Fargo. Seems they controlled the supply by way of lot releases by only 5 per release and well as escalated the prices $ 20,000 per each release. They created nothing by near end panic to build their over glorified Mobil home park. I would say these S.O.B.s snatched the purse and ran off with the Visa card inside the wallet.
    As part of our objective to make the home buying process more convenient and to increase the efficiency of our building cycle, we originate mortgages for our customers through Ashton Woods Mortgage, LLC, which is a joint venture with Wells Fargo Home Mortgage. It has a mortgage capture rate (representing the percentage of our homes closed with mortgages originated by Ashton Woods Mortgage, LLC) of more than 80.0% and does not retain or service the mortgages that it originates. Ashton Woods Mortgage, LLC provides mortgage origination services only, and it originates mortgage financing for qualified homebuyers for the ultimate purchase of our homes. Upon origination, the mortgages are sold concurrently to Wells Fargo Home Mortgage or other third party mortgage companies as deemed necessary by Wells Fargo Home Mortgage. We record Ashton Woods Mortgage, LLC’s earnings using the equity method of accounting, and its earnings are a component of the line item of “Earnings in unconsolidated entities’’ on our income statement.
    We are owned by six families or family trusts related to the following individuals: Elly Reisman, Norman Reisman, Bruce Freeman, Seymour Joffe, Larry Robbins and Harry Rosenbaum. The owners control us through individual Nevada-based holding companies in which each family or family trust owns all of the equity interests

    Someone belongs in jail and it will not be me !


    Contact: Sarah Muench

    Feb. 7, 2010

    (602) 926-5848


    House Democrats unveil Homeowner Relief for a Strong Future

    STATE CAPITOL, PHOENIX – House Democrats announced on Monday a homeowner relief package to hold government accountable at a time when the state again ranked second in the nation this month for foreclosures.

    Homeowner Relief for a Strong Future offers balanced, responsible solutions for the foreclosure crisis, prevents fraud and preserves our communities.

    “These bills directly deal with the foreclosure crisis, a problem in Arizona that Republicans have ignored in the past,” said Rep. Debbie McCune Davis, D-Phoenix (District 14). Recent figures as of Thursday show that Arizona continues to rank second in the nation in foreclosures. We have held that top spot for the past few years, and now it’s time to hold government accountable so we can have a strong economic future.”

    McCune Davis has asked House Commerce Committee Chair Jim Weiers to establish a subcommittee on foreclosures.

    In February, Arizona jumped to second in the nation in foreclosures. One in every 17 Arizona households received a foreclosure filing last year. (http://www.post-gazette.com/pg/11014/1117879-28.stm#ixzz1D2zRAq9o)

    Homeowner Relief for a Strong Future includes the following bills:

    HB2383 Borrowers’ Bill of Rights: Guarantees homeowners the right to receive timely and accurate responses to good-faith borrower inquires. (McCune Davis)
    HB 2283 Abandoned Home Crime Reduction Act: Requires current and accurate ownership information on all property and assists neighborhoods and law enforcement in reducing crime. (McCune Davis)
    HB 2626 Home Sales Notification Act: Allows homeowners in foreclosure to be notified of sales, even when the initial sale is postponed (McCune Davis).
    HB 2124 Homeowner Relief Act: Keeps homeowners in their homes by granting temporary (60 day) relief to residential homeowners, who are in foreclosure and in danger of losing their home. (Patterson)
    HB 2123 Safe Neighborhoods Act: Requires the maintenance of properties during the foreclosure process. (Patterson)
    HB 2430 Right to Rent Act: Allows homeowners, whose foreclosed homes are of low to moderate value, to remain in their homes as renters for an extended period of time. (Tovar)
    HB 2642 Mandatory Mediation Act: Offers homeowners facing foreclosure in an owner-occupied home an additional step that would require a mediation process to take place before the property may be foreclosed. (Tovar)
    HB 2641 Arizona Home Equity Theft Prevention Act: Protects homeowners who are facing foreclosure from scams and fraud. (Tovar)
    HB 2632 The Tenant Rights Act: Ensures that if a tenant is lawfully in possession of the property when a foreclosure action is initiated, the tenant is able to continue to rent the property for the remainder of the lease or 90 days, whichever is longer. (Hobbs)
    HB 2269: Truth in Mortgage Brokers Act: Cracks down on bad acting mortgage brokers and protects borrowers from bad lending practices. (Ableser)

    “This package of bills could not come at a more critical time for our state,” said Rep. Daniel Patterson, D-Tucson (District 29). “We need to hold government accountable to enact legislation that strengthens our housing market and the financial well-being of our communities. Those steps include fighting scams and fraud and encouraging lenders and borrowers to work together for the best possible outcome.”


    Sarah Muench
    Communication Director
    House Democrats, Arizona Legislature
    (602) 926-5848

  6. Origionating docs ” mers beneficiary”

  7. Good post Neil

  8. Bad boys what ya gonna do when we come for you bad boys

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