Mortgage Fraud and Foreclosures.

Mortgage fraud is rampant in California. California is the largest U.S. market for high-risk home loans, and now with so many subprime lenders facing bankruptcy as a result of the upheaval in that end of the mortgage market, California Attorney General Jerry Brown has opened an investigation of the subprime mortgage industry.
A spokesperson for Brown wouldn’t comment on which companies may be targeted or how far the probe has progressed so far, according to Bloomberg.com.
Half of the 20 biggest U.S. subprime lenders, including No. 2 New Century Financial Corp., are located in California.
According to the Mortgage Bankers Association, about 13 percent of the country’s subprime loans are in California. One state lawmaker said predatory lending practices and improper disclosure of terms may violate state consumer-protection and fair-lending laws.
According to the Mortgage Bankers Association, about 13 percent of the country’s subprime loans are in California. One state lawmaker said predatory lending practices and improper disclosure of terms may violate state consumer-protection and fair-lending laws.
As defaults on subprime mortgages have increased — delinquencies on subprime mortgages rose to 13.3 percent in the fourth quarter 2006, the highest since Sept. 2002, according to the MBA — at lease 30 lenders have stopped operations, gone bankrupt or sought buyers since the beginning of 2006. New Century Financial has already stopped lending in Idaho, Iowa, Michigan and Wyoming, and one news source reported that more than a dozen states told the company to halt operations after consumers complained their loans weren’t funded after being approved.
California previously investigated subprime lenders and was one of 49 states to share in a $325 million settlement with Irvine, Calif.-based Ameriquest Mortgage Co. last year over claims that the company cheated customers by misrepresenting loan terms and getting inflated appraisals.
Ameriquest is the sixth-largest U.S. subprime mortgage company.
"Because of the financing that was possible, so many people bought the bigger house. People across all income brackets are having financial hardship."
For those on the frontlines of the growing U.S. mortgage crisis, these are the early signs that the explosion of subprime loans made to mostly poorer borrowers is reaching higher ground. The damage is hitting homes financed through jumbo loans for more than $400,000 and so-called Alt-A loans that are a notch above subprime and a step below prime.
Americans already are facing foreclosure at a record pace, according to the Mortgage Bankers Association. Lenders started foreclosure actions against more than one in every 200 U.S. mortgage borrowers in the last quarter of 2006.
About 2.2 million foreclosures due to bad mortgage loans may cost U.S. homeowners $164 billion, mostly from lost home equity, according to the Center for Responsible Lending, a Durham, North Carolina-based research group.
In the last three months, the percentage of foreclosures for U.S. homes valued at more than $750,000 has climbed to 2.5 percent, the highest since early 2005, when RealtyTrac, a online marketplace for foreclosed properties, began tracking data. The overall rate of foreclosures also is on pace to increase by a third this year.
"Everyone's looking at subprime. The rock they aren't looking under are the adjustable rate mortgages and teaser rates and low money-down loans, It's going to affect prime as well."
Delinquencies and defaults will rise, weighing down most of the housing market.
California, with 3,384 foreclosures of higher-scale homes since December, is leading the nation, followed by Florida and New York, according to RealtyTrac. The MBA doesn't track foreclosure data by home value.
Adding to the grief, mortgage scams and con artists trying to take advantage of distressed homeowners abound, boosting foreclosure rates, county workers said.
"It's not the American Dream anymore," said Fran Napolitano, a county clerk in Hackensack. "It's 'who can I stab next."' It's sad. It's just an awful feeling," she said. "You hope that you can come up with a financial plan to help people remain in their homes, but sometimes it's not the best thing for them." "If they can't afford it, sometimes the best thing for them is to walk away."

Federal Reserve Chairman Ben Bernanke said Wednesday uncertainties surrounding the U.S. economic outlook had increased recently, and that future interest-rate decisions by the Fed would depend on how the economy evolves. "The near-term prospects for the housing market remain uncertain," he said, adding that developments in the subprime mortgage market, which caters to borrowers with weak credit histories, had raised additional questions about the housing sector.
Bernanke said the central bank believed the economy was still likely to expand at a moderate pace over coming quarters.
But he said: "This forecast is subject to a number of risks. To the downside, the correction in the housing market could turn out to be more severe than we currently expect, perhaps exacerbated by problems in the subprime sector."