Filed under: Consumer experience, Scandals, Centex Corp (CTX), Housing
Current reports reveal a surprising amount of criminal activity in the mortgage business. This is particularly true in says whose names end in the letter A, such as Florida and Nevada. Two particular forms of illegal behavior are the licensing of mortgage brokers with criminal records and homebuilders’ use of bribes — or ‘incentives’ — to encourage people to buy over-priced houses without disclosing them to lenders as required by law. Think I’m kidding?
DSNews reports that last week, Florida’s mortgage commissioner resigned after it was revealed that he allowed mortgage brokerage licenses to people with criminal records. Specifically, DSNews wrote that Don Saxon, who had been Chairman of the Office of Financial Regulation (OFR) had “allowed more than 10,000 people with criminal histories - including bank robbers, racketeers, defrauders, embezzlers, identity thieves, and tax evaders, among others - to work in Florida’s mortgage lending industry between 2000 and 2007. These convicted felons had expropriated more than $85 million from lenders and homeowners during that time.”
Meanwhile, things weren’t much more legal in Nevada. That’s where the Wall Street Journal reports that the Las Vegas, NV branch of home builder Centex (NYSE: CTX) paid off the credit cards and mortgages of potential borrowers to entice people to buy homes priced from $350,000 to $550,000. The FBI is investigating allegations that Centex didn’t always disclose these ‘incentives’ to lenders as required by law.
In some cases, developers gave large commissions to real-estate agents who then gave that money back to the buyer. The goal was to get people to pay the inflated prices for developers’ houses without letting the bank in on the ‘incentives.’
I suspect that this is just the tip of the iceberg. It makes you wonder whether the government regulators who were supposed to be preventing this behavior were also getting a piece of the action.
Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in Centex securities.
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