The Pinnacle of Mortgage Fraud

Hat tip Chris, who sent me this Reuters article that highlights the rampant fraud that took place within the mortgage industry as a result of the recent housing boom.  The story highlights the fate of a particular downtown Miami condominium building where nearly 1/3 of the building 640+ condos are now in foreclosure.  The reason?  Straw-buying, cash out at close, mortgage loans that have been abandoned. First, a primer on how these cash out at close deals work with a straw buyer.  First, you find someone with great credit who is willing to go on the loan in exchange for some money (say $5-10K).  Then you have an appraiser inflate the value of the property as much as possible so that the loan size is as big as possible.  Then you buy the property for the actual