Insider Confirms Builder Complicity in Appraisal Fraud

Editor’s Comment: Appraisal fraud, ratings fraud, misrepresentation, steering investors and borrowers in the wrong direction — all of these amount to the same thing: DECEIT. And as everyone knows, when someone is bilked out of money or value through deceit, they are entitled to made whole — as close as possible, and probably entitled to punitive, exemplary or treble damages. This is no theory. This is hundreds of years of common law a statutes.

So why is the media narrative and the courtroom argument centered on whether the homeowner made payments on a loan that was sold to him under false pretenses? Why is the focus on the homeowner when the real creditor is not in the room? Why are they demanding so much money when part or all of the obligation has been paid (satisfied) through credit enhancements, credit default swaps, insurance and federal bailouts?

The reason why the narrative is on the wrong subject is because you let them take over the narrative. In our course coming up on Discovery and Motion Practice we’ll be talking about how to take control of the narrative. But for now, the message is this is an obligation in search of a creditor and the people who are collecting and enforcing the payments of principal and interest are ignoring the fact that payments were made by third parties, sending out statements that are incorrect or just plain lies, and sending out notices of default and notices of sale on mortgages that are paid off in whole or in part by third parties. STAY ON YOUR MESSAGE.

From Comment on Blog: May 8. 2010

Neidermeyer finds it hard to believe that Builders participated in the mortgage fraud because he has not seen it first hand like I have.

I have been in the real estate business since 1993 during that time I was a loan officer for various independent loan brokers. ( no I did not fund ANY preditory loans, option arms, 3 year pre-pay penalties..etc. and my clients were forced to read their paperwork because I was at the closing table with them)

The first fraud I was witness to was borrower steering. The builder would offer incentives to buyers for financing if only the borrower would use the builders in-house lender directly. The incentives on average would be around $3000.00 toward closing costs. At the beginning of the application buyers would be quoted a rate about 1/8 below market so it appeared that the Builders lender would give them a good deal. When the home was finished 6 months later, 9 times out of 10 the rate had risen and the rate at closing was actually 1/8 to 1/4 percent higher than the buyer could have gotten with their original broker.. So the incentive for closing costs was a sham to steer clients to in house banks.. aka Countrywide on many occasions..So new home buyers check the comparative rates the day you closed and you will see the builders lender saved you no money.

2. Appraisal fraud was rampant. New homes always cost more than comparable resale because the prices for upgrades are added into the loan at retail..

What has to be investigated are the first 3-4 sales in the development or nearby developments..who are those parties and what is their relation to the builder? And how was the comparable property purchased? Cash? Deed Transfer of some sort etc.. often employees or relatives of the builder would” buy”” a home and close on it to create a comp.. perhaps 2 and then the appraiser could go outside the development for 3rd comparable sale at another builders development.

Voila they now have comps and they just turned $200k houses into $300k houses!

Condo Developments/ condo conversions: the HOA and property management company will often still be owned by the developer under another LLC.. look for the same officers..the hoa will be asked to certify certain information about the development on the appraisal..such as owner occupancy ratios, number sold etc. And the HOA cert will lie about the ratios to get the appraisal approved in underwriting.

I just had a client win a settlement due to my research..The appraisal was one of the worst I had seen and ordered the Landsafe and Countrywide in house..The comps used were 5 miles away and 2 times the sq ft and bedrooms.. completely uncomparible properties to start with and the adjustments down for sq ft and bedrooms was laughably small..the HOA cert( by the developers other llc) stated 175 owner occupied when there were only 3 mailing addresses in the development in public records for owners that were not in another state! I also found that one of the signatories for the builder had her own LLC’s and one of her business addresses was the one comparable sale within the development included on my clients appraisal and “owned by an entirely different individual!

And the worst thing I found on this appraisal was the appraiser’s comments section where he admitted the unit had not yet been renovated and that the builder intended to do so after the next tenant changeover..NOT RENOVATED YET! and yet still he appraised the unit as/if it was renovated..the targeted client lived out of state and never saw the property he purchased..

I also looked at the early transfers..of course there were 2 that were sold at 160K when nothing prior had sold over 64k..interestingly after the initial inflated transfers there were several deeds recorded by the officers of the builder llc and friends for the same units at 48-68K done quietly so as not to hurt their comparable sales.

Check the upgrade sheets and what you were charged for certain upgrades… a client of mine was charged over $30,000 for paint upgrades! I am not talking murals here.. a sponged hallway and 2 tones for moldings and walls..

So yes the builders are more than responsible for the inflated values..the partnered with the banks to create this market..It is all in the research!

Credit Suisse Appraisal Fraud Cited by Investors

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals.

Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

Editor’s Note: Don’t overlook this piece. It points directly at the heart of the mortgage meltdown crisis. They knew how to inflate values for the purposes of inducing people to buy into financial instruments. That is what happened to homeowners and the investors who purchased mortgage-backed securities.
Read on. It also outlines the scheme by which the banks played “heads I win, tails you lose.” They structured the investments such that there could be no winner other than the bank. Again, exactly what happened to homeowners and investors. Create an investment you know is bad on both sides, and while the foreclosures come piling into courtrooms, quietly walk away with trillions of dollars leaving the investors and the homeowners with nothing.
January 5, 2010

Credit Suisse Is Accused of Defrauding Investors in 4 Resorts

HELENA, Mont. — Investors at four high-end resorts have filed a class-action lawsuit against Credit Suisse and the real estate services company Cushman & Wakefield, contending that they conspired to inflate the value of the properties so they could take them over.

The suit, outlined in an 84-page complaint filed Sunday in federal court in Boise, Idaho, details what it calls a sweeping loan-to-own scheme. Credit Suisse, according to the complaint, raked in huge fees on loans against the properties, which it syndicated and sold to hedge fund managers. If the resorts could not pay back the hundreds of millions of dollars in loans, based on the inflated values, Credit Suisse could either assume ownership as the agent for the creditors or sell the resorts.

The properties include the Yellowstone Club at Big Sky, Mont., which has multimillion-dollar “ski-in-ski-out” homes and private slopes. Its members include Bill Gates, the Microsoft chairman; the golfer Annika Sorenstam; former Vice President Dan Quayle; and Peter Chernin, former president and chief operating officer of the News Corporation.

In addition, developers and property owners at Lake Las Vegas in southern Nevada, the Tamarack Resort in central Idaho and Ginn sur Mer in the Bahamas are also party to the lawsuit.

The suit was brought on behalf of at least 3,000 investors by L. J. Gibson, who owns property at three of the resorts, and Beau Blixseth, the son and business partner of Timothy L. Blixseth, the developer who bought land near Yellowstone Park and developed the famous club. The involvement of 4,000 to 5,000 more litigants at 10 other resorts, including the Promontory Club in Utah, is pending.

A Credit Suisse spokesman, Duncan King, said, “We believe the suit to be without merit, and we will defend ourselves vigorously.”

Dwayne Doherty, a spokesman for Cushman & Wakefield, which provided appraisals of the property, echoed that statement. “The allegations are completely without merit, and we will defend ourselves vigorously,” he said.

The lead lawyer in the suit, Michael J. Flynn, of Rancho Santa Fe, Calif., said he could not comment until the judge allowed the class action to proceed.

The suit accuses the defendants of engaging in a sweeping conspiracy that focused on the developers of the resorts. Specifically, the complaint accuses Credit Suisse and Cushman & Wakefield of racketeering, breach of fiduciary duty, mail and wire fraud, money laundering and negligence. The suit describes Credit Suisse as an “international banking predator.”

In the complaint, the plaintiffs’ lawyers contend that Credit Suisse and Cushman & Wakefield conspired by setting up a Cayman Islands branch to circumvent federal law on real estate appraisals. The complaint also alleges that they inflated the value of the resorts and made millions of dollars in fees on loans against the properties. Credit Suisse knew the resorts would most likely default under the weight of inflated values, which would allow the bank to take ownership as agent on behalf of the creditors, the suit contends.

The Yellowstone Club borrowed $375 million from Credit Suisse in 2005. After the economy began to falter, Edra Blixseth, who won control of the property in a divorce from her husband, Timothy, was forced to declare bankruptcy in 2008. The property was sold to CrossHarbor Capital Partners in 2009 for $115 million, about a quarter of the estimated value of the club at the peak of the market, though Credit Suisse retained the right to collect the loan after it was sold.

In May, in the Blixseth bankruptcy case, Judge Ralph B. Kirscher of Federal Bankruptcy Court in Butte, Mont., wrote: “The naked greed in this case, combined with Credit Suisse’s complete disregard” for the developer and others, “shocks the conscience of this court.”

“While Credit Suisse’s new loan product resulted in enormous fees to Credit Suisse in 2005, it resulted in financial ruin for several residential resort communities,” he wrote. “Credit Suisse lined its pockets on the backs of the unsecured creditors.” The statement was written in a judge’s order that has since been vacated as part of a settlement agreement.

The complaint also contends that the money to finance loans came from a separate case in which Credit Suisse helped Iranian banks avoid United States sanctions by hiding profits. Credit Suisse paid the government $536 million in December to settle that case.

The suit seeks $8 billion in damages, which it says should be tripled as allowed under federal racketeering statutes.

The decline at many posh Western resorts has been stunning. Values have dropped precipitously, projects are unfinished and investor interest has waned. At the Tamarack Resort, 90 miles north of Boise, the tennis star Andre Agassi has abandoned plans to build a five-star hotel, unfinished buildings have been mothballed and Bank of America is asking a court to allow it to repossess the resort’s ski lifts. Homeowners who bought property and built homes are fuming.

In November, the new owners of the Yellowstone Club liquidated 13 tractor-trailer loads of antique furniture bought by the Blixseths, including a two-seat black walnut throne from a castle in Bavaria that Timothy Blixseth once planned to place in his 53,000-square-foot home. That home was never built.

%d bloggers like this: