Home Loan Scamming Is Still Going Strong -- and Now You're Paying for It

By Yasha Levine, AlterNet. Posted June 16, 2009.

It was 3 p.m. on Saturday, prime house-hunting time. With all this buying activity the industry was reporting, I half-expected to run into other bargain shoppers like myself. But I was the only customer in the real estate office.

"Hello! Have you come to see the houses?" a chipper female voice yelped from a distant corner of the office. "Give me a second, I'll be right out." I couldn't get a visual on her. It was huge, this garage -- er, office -- big enough to hold three cars, easily the size of a decent apartment. Schematic drawings hung on the walls showing all the wonderful house configurations you could order.

That was when the voice appeared in human form: a blond middle-aged woman emerged from a corner office with a bundle of keys. Braeburn had three floor plans to choose from, she quickly started explaining. But I could only look at two of them. The third was still under construction. But if I wanted to, I could drive around and look at it: "It is quite far along in the building process."

The homes were all quite similar: all three had two floors, four to five bedrooms and range of 2,454 to 2,765 square feet. All of them had what's called a "great room," something you see in new home developments that combines the kitchen, living and dining rooms into one great open space.

"We have sold 105 homes so far, and I have about 30 homes left," the agent said, whipping out a photocopy list of Braeburn's homes, complete with lot numbers. "Right now we are headed into this cul de sac. This is our last cul de sac." The rest of the homes would be built on mere streets. She circled homes numbered 85 through 98 surrounding a dead end street called Window Rock Court.

"This is a nice neighborhood. I have a few foreclosures in here, but if you drive the neighborhood and ask the people, they'll tell you how they like it here. And how they are real comfortable. I got some correctional officers here, LAPD, teachers from the school."

Jesus, I thought. What a neighborhood. Prison guards, cops and their school-teacher wives. All die-hard small-government Republicans, no doubt. And all in government employ. The last gainfully employed people in this country, and they're always talking shit about their employer, Big Government.

"But go look at the houses for yourself first. We can talk about it when you go back."

The model homes were fully furnished, and looked like they came out of a Martha Stewart magazine with a theme of "the antique and modern in harmony." I had to hand it to them, it worked. It felt like home, as long as you didn't look out of the master bedroom window. The mini-highway and a barren desert wasteland dotted with high-voltage power lines squashed that comfort feeling.

These houses were clearly a step up from the entry-level McMansion I lived in just a few blocks away. But were they worth the extra $100,000 that you could be saving if you tried to get one of few foreclosed properties that are on the market? The sales lady assured me they were, and besides I'd never get a house for that price in Victorville.

"I have a lot of people coming in here that have been bidding on foreclosures until they are sick of it. They bid and they bid and they bid, and 20 other people are bidding, too. You throw a number out, and you never get anywhere. So they say 'I want my tax credit. I want my new home. I'm gonna pick my own carpet. I know it's under 10-year structural warranty and two-year cosmetic warranty.' "

Are the news reports about the increase in home sales true, I asked. She nodded. "I've been here for three years. Last year was really slow going, but this year has been really good. I've had four sales last month, three sales the month before that. First-time home buyers, that's what I'm getting. People are like ‘prices are down, the rates are low ... time for me to get a house.' So why not? People are not afraid of getting into homeownership. So that's a good sign, right?"

Of course, I nodded. Great for the economy. Great for Victorville. But the longer we talked, the more obvious it was FHA loans were at the core of a real estate scam of frightening proportions that was reinflating the real estate bubble with taxpayers' money, all in the name of economic recovery.

"Oh yes, we work with a lender. All you have to do is come in and let me worry about the paperwork. Right now you'll probably be able to get a 5 percent interest loan, which is good. And credit history is not much of a problem. We are doing just FHA loans, so we don't even go by a FICO score. If you haven't been late in the last 12 months on anything, you are eligible. People get in here with credit scores of 580s and 600s, but they've been on their job for 15 years, and they got a good history. The FHAs, that's what's helping out the first-time home buyers."

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Read more of Yasha Levine's work at eXiledonline.com.

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