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By Jim Perez,
DebtHelp, Inc. Staff Writer
U.S. Sen. Norm Coleman,of Minnesota, is floating a plan to help homeowners who are facing foreclosure.

Called the HomeOwners Mortgage Emergency Act, the Republican’s Ponzi scheme would allowhomeowners to withdraw up to $100,000 from their retirement accounts withoutpaying any penalties or taxes. They could use the money to pay any latepayments and fines.

At first blush, the proposal sounds good.

If you’re sinking I guess any flotation device lookspromising.

But reading between the lines, the flotation device mayactually be the rock that drags a homeowner down for the third time.

Borrowers would have to repay the money back in three yearsor have a tax lien placed on their home for the taxes and withdrawal penaltiesthat were initially set aside.
One of the other factors not mentioned is that many familiesfacing foreclosure secured those homes with subprime loans.

According to the CongressionalBudget Office, most of those families may not actually have those retirementaccounts from which Coleman is so graciously allowing them to draw.

The CBO found that only 42 percent of people earning between$40,000 and $80,000 contribute to a 401(k), and just 10 percent contribute toIRAs. For those earning below $40,000 a year, the percentages are even lower.

These are the very families the subprime lenders preyed, Imean focused on.

If these families had the means to save in the first place,they would not be facing foreclosure now.

Of course Coleman’s plan doesn’t hold mortgage lendersaccountable for bad behavior.

The late Edward Gramlich, a Federal Reserve official, wrote that”the subprime market was the Wild West. Over half the mortgage loans weremade by independent lenders without any federal supervision.”

Coleman doesn’t want a government bailout of homeowners.Rather, he wants the government to allow the banks to be able to raid the 401(k)sof homeowners, which they cannot currently do in the case of a bankruptcy.

If a homeowner declares bankruptcy, as many in foreclosure arelikely considering, retirement accounts are off limits.

Coleman’s scheme is a way for banks to strip every lastasset from homeowners before taking their house.

And as most politicians are so willing to do, Coleman isdancing with those who brought him tothe dance: According to the Centerfor Responsive Politics, as of June 2007, Coleman had received campaigncontributions totaling $1,069,649 from the securities and investment, realestate and commercial bank sectors.

I won’t even mention that retirement accounts – for thosewho do have them – should be left for retirement.

Of course, if Coleman and the rest of the GOP cabal havetheir way, the middle class won’t retire: We’ll all be working at Wal-Mart tosupplement our privatized Social Security that they invested in hedge funds forus.

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By Seth Kravitz,
DebtHelp, Inc. Staff Writer
Mortgage brokers and borrowers may be guilty of funneling as much as $100,000 per mortgage closing in commissions and closing costs into their bank accounts by falsely inflating the home valuations. This is the most recent proof that the mortgage meltdown may be more severe then currently anticipated. This new information comes from a FBI and California Department of Real Estate investigation.

While technically cash-back mortgages are legal, they turn into a felony when they misrepresent the value of a home and the borrower does not notify the lender that the valuation is inflated above market value. Apparently, thousands of mortgage brokers and borrowers in California alone, didn’t get that memo. Who knows how wide spread this practice may go.

Now that the market is crashing, all of a sudden these illegal loans are starting to surface and may expose the mortgage industry to an even more extreme potential risk in the future. With the Citigroup CEO resigning due nearly $12 billion in estimated losses for the year of 2007, its obvious even the biggest banks are really feeling the crunch now.

Adding in billions of dollars in illegal loans just now surfacing, is only going to fuel that fire even more.

In southern California, entire neighborhoods were sold house by house using illegally inflated mortgages. The problem has gotten so bad in this region that local governments like San Joaquin County, are forming real estate fraud task forces to start policing the area for these loans.

Its easy to see the draw of these illegal loans, they allow the borrower or broker to funnel tremendous amounts of cash into commissions or into the borrower’s bank account. When banks lowered their standards to allow nearly anyone to qualify for any loan they wanted, it became even easier to funnel these loans through the system without detection.

Then after these loans would process and the payments would be dealt out, the broker or the borrower or both, would sometimes flee the area and default on the mortgage.

Those of you familiar with buying a home would know the value of the house comes from an appraiser. An appraiser is sworn under strict legal terms, to remain neutral and provide an accurate and honest appraisal for a home. So, how did these brokers and borrowers get highly inflated appraisal prices?

The oldest trick in the book, bribes. They would line up 5-6 different appraisers to come out and look at the house and tell them they will award the appraisal to the company that produces the highest value.

When asked, a local real estate expert in Southern CA, said that cash-back mortgages had become so common, they were considered the “normal” route for many brokers.

While the broker and the borrower were involved in many of the transactions together, the investigation showed that many times the buyer was in the dark about the process, even though they may face criminal charges regardless.

As always in the mortgage world, ignorance is no defense.

For a lot of these mortgages to go through, it required the buyer and broker to go outside of escrow to complete the transaction. This is where the buyer ignorance defense gets its biggest strike against it. No borrower in their right mind should ever assume its normal for a bank to offer thousands, tens of thousands, or hundreds of thousands of dollars on a “credit” basis outside of the standard escrow system.

If you are wondering how these deals typically start, it usually will involve a call with an offer like this: The house is worth $350,000 and the broker will offer you $425,000 with a credit backing of $50,000 for “repairs” or “improvements”. He will send you the papers with an additional “rider” attached, typically on the last pages, outlining the terms of the mortgage. The the deal is completed and funded outside of escrow and the broker takes his $50,000-$100,000+ commision.

One company suspected of that exact process outlined above would be Freedom Capital Mortgage, who had six of its brokers indicted for creating illicit contracts involving cash-back mortgages. These brokers would add on an extra page at the end of the contact that the bank would never see, outlining the terms of the cash-back mortgage.

To sum this all up, it looks like predatory lending and mortgage fraud extend further then anyone is currently discussing. Since these bad loans can take months or even years to uncover, it could be quite a while before we get any real idea of how many illegal cash-back mortgages were dealt out.

An FBI spokesperson said mortgage fraud cases are “exploding” and the situation is “unlike any I have ever seen” and that the number of cases nationwide is “astronomical”.

Looks like we won’t be getting the big housing turn around any time soon like all the pundits on the news claim.

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