Slumlords And The Real Estate/Banking Industry. | zero hedge

Slumlords And The Real Estate/Banking Industry. | zero hedge
Slumlords And The Real Estate/Banking Industry.
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Mon, 05/10/2010 - 22:22
mysticide

Joined: 04/10/2010
I checked things out locally to find out about the mortgage default rate and I discovered that only a small handful of people, private homeowners as an individual or a family have done this.

I compare that to the 40 that the landlords dumped on the bank and in the official record across the board both with the banks and the media, I discovered that ALL of the defaulted mortgages are blamed on anonymous John Doe private homeowners when the fact is, only around 10 of these types of private people defaulted in this locality (which surprisingly even with the economy the way it is is not an abnormal default rate around these parts) while 1 alleged business man mass defaulted on 40 but yet all 50 are attributed to John Doe homeowner as if John Doe homeowner is a financial scum who over spent himself and defaulted on his creditors resulting in a bank bailout and as such a burden on the taxpayer. There is also reason to believe that the slumlord has contacts inside the lender who may be a family members working there. One cannot help but smell a potential conflict of interest.

That is what is being concealed inside the total amount of defaults across the board, 1 man or 1 family defaults on 1 home mortgage, 1 businessman defaults on 40 (multiple mortgages) but yet all 40 are publicly played off by the banks and the media as if all these properties were defaulted on by the man in the street.

My theory is that slum lords, yeah private low life businessmen and women all across the US dumped collapsing houses onto the banks, literally "collapsing" housing dumped onto the banks, slums dumped back onto the banks, dilapidated housing on the banks, caving in houses dumped back onto the banks, housing unfit for human habitation dumped onto the banks. I think they got the rent money out of it for years and decades, never met their obligations to take care, maintain and upgrade the properties because people who can't can't afford lawyers, to be livable but never ceased collecting the rent and when the time was right they just abandoned it. Look at the bills that banks suddenly inherited due to this. The slum stories are mounting as we speak. It was mostly rental properties but local, state and national slum lords have yet to enter the housing bust debacle.

There is a ton of money to be made in banks holding these mortgage holders to their agreements, the slumlords, no question about that, so, I found it overly suspicious that a bank would voluntarily take back 40 defaulted mortgages.

Why so freaking chummy? Are the bank bosses the slum lords in the form of derivative sources or subsidiary companies or are their friends, family, business contacts the slumlords? Following the money of a city based slum lord is far easier than following the money of an international corporation or a globally operating bank. In my opinion these slum lords and rental property owners should be liquidated to compensate for the bail out.

As you know landlords are not John Doe or the man in the street. Big time rental property owners are higher in class than that and they have "connections." So I dig a little deeper and find names and their subsequent positions to rather important places.

I also discovered that these defaults aren't in their name and they suffer no personal damage or damage to their credit for it!!!! The mortgages are in the name of the rental business or other that they operate. They simply decide after pulling all that cash out of all those rentals that it's time to go out of the rental business and unload it all on the bank in the name of the business and walk away. So there is two factual methods of concealing the identities of these mass defaulters.

As is and for lack of documentation, the man in the street has done all of these defaults which in essence is propaganda in my opinion.

One being a generic and anonymous listing of how many mortgage defaults there are (which by default implicates John Doe) and the identity of the mass defaulter being concealed behind the name of a place of business.

To find out who the mass defaulters are you have to dig deep TWICE, first the total number of defaults and then separate the difference between single defaults and multiple defaults. My research shows so far than the bulk of the defaults is not caused by John Doe but the RENTAL INDUSTRY defaulting on multiple properties. LOT'S OF THEM.

It gets deeper too about how to do this but isn't all inclusive of deadbeat landlords:

1. By getting a HELOC (Home Equity Line Of Credit) loan from a bank.

2. Go to the city, county or state and get a business license to operate rental property.

3. Then engage the former incessant advertisements that we all heard in the 90's about no money down or a puny amount up front with guaranteed/positive cash flow (as they were mass emphasizing rental property, double trouble, this is the same real estate that was gobbled up for pennies after the engineered 80's housing crash as this systemic fraud occurs about every 15 to 20 years disguised as a crash in the real estate market).

(It's happening again as we speak and will collapse again in 10 to 15 years: http://www.landlordsoftware.com/foreclosure_profits.htm)

3. Put the HELOC money or part of it into the bank account of the brand new rental business as operating capital.

4. Take that "company" money (with possibly the company itself as collateral which is meaningless) to other banks and mortgage lenders (possibly the same source lender that the HELOC came from in the first place, hint hint) that are not the bank it is drawn on (in some cases it is the same bank granting a HELOC that owns the subsidiary mortgage lender) to acquire a lot of rental properties. Let's say the wannabe landlord at the time had his own home worth about $70,000 or a $100,00 and got a $25,000 HELOC they could gobble up huge amounts of properties to be used expressly as rental property.

5. With the price of the rent being quite a bit more than the mortgage payment (if there was not a lot of profit involved the one renting would not do this) such as if the mortgage payment is $200.00 per month (or interest only payment) the rent would or may be $400.00 or more per month.

6. Spend years sucking the financial life out of that property (and the tenants since mysteriously mortgage lenders won't touch them to buy a house even with clean credit records and guaranteed income) all the while knowing when your mortgage/interest rates are going to readjust (won't be making a profit between the rent payment and mortgage payment then) and then simply go out of business and dump all that (rental company owned property, not company owner owned property) property and mortgages back on the bank leaving the bank stuck with it because there is nothing they can do against a now defunct rental company that was the mortgage holder.

Sweet huh?

All those juicy low dollar amount mortgage payment deals are a boon for those who want to make a fortune off of rental property but the you know what hits the fan when they landlords mortgage/interests rates adjust.

It is not hard to suspect that property is being mass dumped back on the bank right around the same time that the mortgage holders payments/interest rates are adjusting. That is fraud in my opinion. If only a couple people did that here and there it could be explained away on individual financial circumstances but when it is being done across the board it looks like mass fraud of the rental property industry that is playing such a huge but yet ANONYMOUS role in the housing collapse. The identities of those doing this is largely concealed behind generic default rates and bankrupt company names.

The rental company is 90% of the local default rate yet all those defaults are falsely attributed across the board to John Doe homeowner by the banks and the media.

With a generic listing like this even public bank statements (comments) and bank press releases may be a fraud to secret the identities of the mass defaulters.

Why would the bank want to eat all that property and keep that information under wraps anyway? For all intents and purposes they are getting the shaft and should be letting the dogs out on them but they aren't. Why? That is a separate scandal in itself. The rental property defaulter has connections to shut the bank up from laying blame on the rental industry? The mortgage lender family members in the rental business doing the defaulting? The banks loans out the money and a subsidiary company they own takes in that same money as they sell real estate?

Another possible reason for zero transparency on where the bail out money was dispersed to? That will come out soon enough though and went it does it will hit like a ton of bricks like Greece being totally broke as a nation and becoming a welfare nation.

Given the identities and positions of some of these rental property "businessmen" (lol) it is no wonder why the rental property industry that has been vaguely mentioned at times but has so far has been un-indicted in this mass defaulting debacle.

Maybe the FOIA (Freedom Of Information Act) can be used on mortgage lenders to provide statistics that are not generic. Such as how many defaults they have and how many of those defaults can be attributed to 1 source like if 1 was 1 person business or private (no identities).

* (source) - *(number of defaults)

1-1 (one owner, one default)
1-3
1-15
1-40

In the event of one mortgage is held by more than one person such as co-ownership just replace the 1 with how many co-owners there are.

2-1 (two co-owners, one default)
2-3
2-15
2-40

If a place of business owns it just replace 1 with B.

1-1 (one owner, one default)
2-3 (two co-owners, three defaults)
1-15 (one owner, fifteen defaults)
B-40 (one business, forty defaults)

Stats without naming names.

Then ascertain who is in the rental business which is basically common knowledge just about anywhere, check business license records which is public information, possible check business bankruptcy court records which are public, then you can put the finger on the heretofore unknown culprits who in my opinion are to blame for 90% of the mortgage defaults who seem to be conveniently doing this right about the same time that their payments/interest rates are adjusting on the slum housing that they "own.".

With this happening en-mass it has all the appearance that the plan from the beginning in acquiring property at a dirt cheap monthly rate to use as rental property was to milk it for a cash flow with a premeditated plan to shutter the business when the profit is no longer there which would be at the time that their payments/interest rates are adjusting.

(I forgot to mention that during those years the exampled $25,000 HELOC (or other source of capital even if it was their own savings being replaced over time) could have easily been paid off and the bank can't touch the ex-rental businessman's home in retaliation for all the other failed mortgages. since that crap "company" was in it's own name, it's its own collateral because suddenly the alleged company was worth a lot and could get loans on its assets which were nothing more that debt and payment receivable on homes that are unfit for human habitation.)

So the slumlord lives happily ever after and the banks meaning the taxpayers eats it. Talk about redistributing the wealth, lol.

The landlord could raise the rent after their payments/interest rates go up but no one is going to pay that amount of increased rent to make up for the landlords increased interest/mortgage payment because even with the low price they pay per month on the mortgage, they are already charging at what is supposed to be fair market value (another fraud that does nothing but raise prices) or more for their rental.

He knows that up front so I suspect that the plan was to buy the place dirt cheap, sweet low monthly payments on the interest or mortgage, even bought it "as is" as a slum and rented it under a business license to collect the rent money at allegedly fair market value and then walk away from their obligations when their monthly payment reset.

On the flip side, the banks set themselves up to be left holding the bag at reset time. Possibly even in collusion with the rental property person because how can they say that they had no suspicion that the sweet deal mortgage holder wouldn't walk away from all these rental properties. Even the bank knew by selling to rental property owners that at reset time with the guy already charging fair market value for rent could not continue to do so at reset time and maintain a profit.

You only really need 1 wannabe landlord to go into the rental business and 1 in collusion with him at the mortgage lenders (insiders, friends, family members or whatever) to make a lot of money and then stiff the lender on schedule. The higher up the one in collusion is in the lenders office the less oversight would be given to such sweet deals that are beyond a shadow of a doubt GOING TO FAIL.

Affordable rent is only really available from rental property that is owned free and clear of payments. These rental property owners are largely involved with fair market value but the landlord who has a mortgage about to reset drops his rifle and runs because he is a pig and a liar and a thief they would have to go so far out of fair market value to continue their rental "business" that no one would pay. They knew this in advance, the day they signed to buy the property, the reset date written right there in plain text, no mistake about that. Knowing these things in advance I only see it as a mortgage acquisition scam that they are going to walk away from at reset time.

LEASING TO BUY TO BE USED AS RENTAL PROPERTY.

There is NO OTHER explanation. It has nothing to do with the economy but fair market value in rent that the rental property owner knows well in advance won't support that kind of increased rent to maintain his profit and his increased mortgage payment at the same time.

Banks should only really be doing one thing after being stuck with all that rental property and that is prosecuting the rental property owners for fraud (including any insider at the bank that made it possible) because the rental guy in buying up all that rental property knew in advance about his payments/rates ballooning and knew up front that fair market value for rent will not support the increase that he would need to add to the price of the rent to maintain a profit.

He, knowing these things in advance right there on his mortgage contract and knowing fair market values for rent but yet did it anyway, in my opinion proves mortgage fraud which I think is still a felony. A felony for every piece of rental property that they walked away from when the payments/rates ballooned.

Individually, on a case by case basis, they could explain away their financial actions and reasons for defaulting but with this being pandemic, collectively they can't explain it away. Individual lies or excuses suddenly put into one pile that all gain the same results for the same thing at the same time must yield to mass intent to commit fraud.

The rental property industry is still yet to be held publicly accountable for its contribution to the mortgage default situation.

Until then, private sector John Doe homeowner is taking the wrap for ALL these home mortgage loan defaults.

Summary:

Get capitol.
Get a business license from any greedy city council to run a property rental business.
Put that capitol in the bank account of the new company renting property (or not).
At interest only payments or sweet low mortgage payments, buy up rental properties in the name of the rental company.
Rent them for a few years or whatever duration at fair market value or more.
Sock away the cash.
Go out of business and unload the property back on the bank at interest/mortgage reset time.

Piece of cake.

With each item in advance known buy the buyer because there is NO WAY NOT TO KNOW THESE THINGS.

Again, the taxpayer is subsidizing the mortgage lenders to the tune of trillions of dollars for all the losses on these properties while at the same time these same properties are being gobbled up as we speak by more slumlords dealing in old housing stock that they will not maintain or repair to start the VICIOUS CIRCLE ALL OVER AGAIN that again sets the stage for an industry that collapse in 10 or 15 years.

The trick to all of this is that a slum won't last long enough for round three because a hundred year old house can't last that long BUT IT WILL because you will find no city county or state or federal building codes in effect that has anything to do with rental property and if there is it is it only applies to newly built rental property and only the code at that time so the limbo bank slums are of no value or else the suburbs wouldn't be be slums right? Yeah, use a little common sense.

The mortgage default debacle consists of many John Doe's who were irresponsible or otherwise got messed up on their money, and predators milking the system, predators that are yet to be identified amidst this whole scandal as causing the brunt of defaults that came from 1 source.

One can't help but wonder why rental property owners have been left out while John Doe gets painted for the whole lot.