Flipped Out

[don]

Someone forwarded to me the following pitch for flipping. Thought I'd post it for comment. Hi, for years, mortgages were made by lenders who then promptly sold them off. That's not news. What is news is how casually and illegally these originators handled the paperwork, and the subsequent illegality upon illegality. Let's take an almost perfect analogy. You buy your house from Smith. Smith believes she has a valid title to the house and so does the title company who insures the transaction. Now, Jones comes out of the woodwork. Jones sold the house to Smith. Jones says "I didn't really sell the house. The deed was forged." Now, the sale from Jones to Smith is invalid. And since YOU bought the house from Smith, and since Smith did not really legally own the house, YOUR deed is invalid and you do NOT own the house. This is why legalities and details really do count. The legalities of foreclosures are like this. When Jones gets a loan on a house, Jones gives a claim on that house, called a mortgage, to a trustee in the case of a deed of trust. Or to a mortgagee, in the case of a mortgage which is what they use in states such as Florida. If the bank sells of the loan, then the appropriate note and mortgage and supporting paperwork must travel cleanly to whoever buys the loan. However, the banks didn't do things this way. They took huge short cuts. They sold the mortgage to a third party called MERS. And then they signed over the loan from MERS. If the homeowner didn't pay, they sued in the name of MERS. And this paperwork trail was done in blatent disregard for the law. That is why we have had many people purchase my Loan Mod Breakthrough product in order to figure out how to avoid getting scammed by the lenders. People KNOW they are being scammed. And now a court has agreed. Today's Washington Post article is saying this is not the work of a loan employee of Ally Bank. This employee is said to have signed off on 10,000 foreclosure houses and ALL of these foreclosures might be illegal. But we know it goes much further than that. And it probably affects all states and all foreclosures, not just judicial foreclosures. This is going to get worse and worse. We all know it is. It isn't just a lone employee somewhere. It was completely widespread, industry practice through and through. And still is today. So back to my buddy the home builder. He was asking me about short sales. How can these be so profitable? I said, "number one, the seller doesn't care HOW little or how much you get for their house. So it's easy to get a good deal." And what is number two about short sale advantages? I said, "if you get the right lenders, and avoid certain lenders today who are difficult to deal with, you can get a really good below market transaction going, and you can flip it." This widening trouble with invalid and illegal foreclosures will cause lenders to want to get houses back even LESS than before. I expect short sales to become even better bargains, especially in the higher price ranges. I have been deeply involved in flipping for years now, and I see today's news about foreclosures and the widening effect of the "GMAC" and "Ally Bank" scandal as making today's market even better for short sale flipping. Higher uncertainty for LENDERS equals even better deals for INVESTORS and birddogs. And I have a good buddy who partners with folks on short sales -- puts up the cash, does EVERYTHING and splits the profits 50/50 with you. warmly, --Richard Geller

[swgprop]

Re: Flipped Out

How can these be so profitable?

I said, "number one, the seller doesn't care HOW little or how
much you get for their house. So it's easy to get a good deal."

True the seller likely doesn't care since they won't be getting any proceeds. However it isn't the seller calling the shots it is the lender.

I said, "if you get the right lenders, and avoid certain lenders
today who are difficult to deal with, you can get a really good
below market transaction going, and you can flip it."

Probably true, but in general the short sale process is horrifically arduous and steeped in bureaucracy.

This widening trouble with invalid and illegal foreclosures
will cause lenders to want to get houses back even LESS
than before. I expect short sales to become even better
bargains, especially in the higher price ranges.

A more likely outcome would be borrowers becoming aware of the legal difficulties lenders are having. Once aware it would be in their best interest to simply stop making payments and live for free as long as possible. A short sale is as damaging to a credit score as is a foreclosure so there really is little incentive to the borrower/owner to take the short sale route (unless they are compensated by the lender which is becoming more prevalent).

[metalman]

Re: Flipped Out

it's all too sickening. gross. yuk.