When I first started considering this epidemic of mortgage fraud that I thought I was seeing, one of my realtor friends tried to convince me that it couldn't possibly be material enough to have an impact on home values and rental prices. Forgetting about the fact that smarter people than me are now saying it is "economically significant", and supporting that with data (granular data that has the names and addresses of low hanging frauds behind it…), just consider my work alone:
-I am finding and reporting at least $10 million of low-hanging mortgage fraud per month, most of which I have told you and the feds all about in great detail.
-For every dollar I report, there is at least another dollar of medium-hanging fruit that I don't even bother with.
-I spend about an hour a day looking for and documenting/reporting fraud. I like to think I respect my very small number of subscribers, and formulating something engaging with reasonable presentation, spelling and grammar that you guys will actually want to read is taking a lot more of my time lately! A good problem…
-The areas I have been focusing on are very small. I will have to heatmap it at some point….
-Within those small areas I only focus on recent rentals with recent home sales (no consideration of owner occupancy refis or off-market rentals etc.)
So, even if I worked just a little harder and reported everything I find, that would be what, a Quarter Billion by end of the year? Now, imagine if I could clone a few of me and work full time on it, allowing me to look at all properties going back ten years (the statute of limitations). Couple of Billion easy. Now let's look at some farther flung areas of Greater Phoenix and beyond. Fountain Hills, Gilbert (fastest growing city in the U.S.?), Glendale, Flagstaff, Tucson, Yuma…$5 Billion easy. Multiply by 20 or so major housing markets.
Still think it is insignificant in a housing market "on the bubble"!?
"So, what should we do about it Ducky, throw everyone in jail???"
Nope! Since god forbid, we try to regulate the banks or Wall Street in any way (that never quite sticks anyway?), the easy solution is to treat it exactly the same way we treated offshore banking cheats:
Establish and highly publicize a national amnesty program and send everyone in the Feds' database (ie those with two owner occupancy mortgages and/or multiple second homes) one courtesy notification. You have three years to self-report and get good with your lenders (and the states/cities if you have not been registering or paying your taxes). First year, the civil penalty (buying the promise of no federal criminal prosecution…) is 3% of your initial mortgage. Second year 5%. Third year 10%. If you are found out before you self-report, all bets are off.
Establish and ramp up a national taskforce and vigorously pursue and prosecute the worst offenders that don't self-report, particularly after the first year.
Assuming even half of the offenders self-reported in the first couple of years, that would be at least a few Billion for the treasury? So, my 10% would come to…just kidding!? Take that money and you have some funds to provide lower rate mortgages to maybe 10,000 honest first-time homebuyers? (Just an example…you can give more to the Pentagon, the oil companies or to bail out the banks again if you are so inclined…)
Epidemic mortgage fraud would be a thing of the past, Wall Street would temporarily have their asses handed to them (because it IS economically significant and values and rents WOULD take a hit…), and maybe a first-time home buyer could actually find an affordable home in a decent neighborhood. You know, to actually live in!? Oh, inflation would probably cool a little as well???
Now…about my 10%!!!;)