Sonoma Housing Bubble

Pulling the cork out of Sonoma's bubbly housing foolishness

Friday, June 15, 2007

It's Not Identity Theft, More Like Identity Rental.

Paging George Costanza! We have Vandelay Industries
on line one, at least that's what it seems in this New York Times article. Back in the day when people were complaining about the Seinfeld finale instead of the Sopranos finale , one of the main characters attempted to fake employment.He claimed to be working for Vandelay Industries as a
Latex salesman, although he is only trying to be hired by Vandelay Industries, the fake latex company which holds Jerry's phone number, so that he is still able to obtain unemployment checks, because that qualifies as legitimately looking for work.

What's going on out there in the "reality based community" isn't that far afield from the old days of Seinfeld. Here's a comeon that would warm the cockles of George Costanzas' heart.

Want to buy a home, but hampered by bad credit, an empty bank account or no job? No problem!

That may sound like an exaggeration of a late-night infomercial. But it is, in effect, the pitch that a number of Web sites are making to consumers, saying insolvent home shoppers can be made to look more attractive to lenders.

The sites, for example, offer better credit scores by hitching customers to a stranger’s credit card, or providing them pay stubs from a bogus company. One has even offered a well-stocked bank account to rent for a month or two.

Industry experts say these sites, which are relatively new, played a role in fueling the rampant mortgage fraud that has caused a huge spike in loan defaults in recent months because people bought homes they could not afford.

“There is a whole underground world — an online cottage industry — that has grown up that allows anyone to commit mortgage fraud,” said Constance Wilson, executive vice president at the financial fraud detection firm Interthinx.

I was reading an article online the other day about a company that sells commencement addresses to high school valedictorians, there are companies that sell term papers, and even fake degress from prestigious "uncredited universities" where one could even claim to be a "marine biologist" (Georges' dream job). It appears that it's now possible to ride through life on a magic carpet on fake paper.
When one looks at the numbers involved in this fraud how can anyone question the rising tide of foreclosures that are being predicted.

An examination of loans made last year, including prime and subprime, in which some sort of fraud occurred, showed that incidents of false tax or financial statements had risen to 27 percent from 17 percent in 2002; fraudulent verifications of deposit had climbed to 22 percent from 15 percent four years ago; and false credit reports rose to 9 percent from 5 percent in 2002, according to a report issued this spring by the Mortgage Asset Research Institute based in Virginia.

If any documents were required, it was unclear whether the bogus documents were created by do-it-yourselfers or whether they turned to the products and services sold over the Internet.

Excactly how does this little gambit work? Weeelllllll.....

One site, RaiseCreditScoreNow .com, offers to add a person to four separate $20,000 credit lines with 10 years of “perfect payments” for $4,000 (although they do not have access to the actual credit line). Doing so could increase an individual’s credit score by as much as 200 points in 90 days, the site says, and make the difference between qualifying for a home loan or not.

People with strong credit scores and a reliable payment history of at least 24 months on various credit accounts can be paid up to $1,000 for each person they add to the account as an authorized user, the site offers.

Several lawyers said it was unlikely that this practice was illegal, although many warned it could open the person renting out their credit card lines to fraud or identify theft. Attempts to contact the Web site were unsuccessful.

Yeah, I'm sure they were. I'd love to meet the doofuses they talk into renting out their good credit for these purposes. I can't imagine anyone wioth a decent credit record that would need 1000 dollars that badly.

Offically, the term is called "Piggybacking" and of course it's "technically not illegal" which explains a whole lot of what we're seeing out there. Of course the FICO people have now gotten wise and in a world beating case of closing the barn door after the horse has not only gotten out, but won the Triple Crown and gone to stud, declare:

Last week, the Fair Isaac Corporation, the company that developed FICO credit scores, said it was trying to shut down piggybacking.

Starting in September, Fair Isaac said people who were added to someone else’s credit line would not benefit from the secondhand credit history in its formula, which is used by the three major credit bureaus.

“There is going to be no way to get around the new system,” said Ron Totaro, vice president for global scoring solutions at Fair Isaac.

I think the operative word for this is "trying". If that's the best they can do they deserve everything they get.

However, this whole mess speaks to a bigger problem. If there has been fraud on this wide a scale, then our lawmakers are going to have to worry about more than just catching the bad guys pulling off the capers. They are going to have to worry about the lawabiding taxpayers out there for whom piggybacking was a ride that ended at the age of 5. Those people are not going to look fondly on any "Mortgage Bailouts"that come out of their pockets. After all, just because you've gotten away with robbing my bank it doesn't mean I have to help you carry the safe to the get-away car.


At 6/16/2007 07:58:00 AM , Anonymous Anonymous said...

Thank goodness we can count on the outrage of our representatives to ensure that honesty and the rule of law will prevail against the forces of evil seeking to undermine our fair republic.

At 6/16/2007 09:56:00 AM , Blogger moonvalley said...

Yeah. Right.
as Jerry would say, "And you want to be my latex salesman!"

At 6/17/2007 08:50:00 AM , Anonymous Anonymous said...

Some Latex goods are fun to demonstrate.

At 6/17/2007 12:05:00 PM , Blogger ukhousingbubble said...

Checked out the website recently. If they can't prosecute Casey for mortgage fraud then all fraudsters are safe.

At 6/17/2007 04:23:00 PM , Blogger moonvalley said...

Raise Credit Score describes piggybacking as something legal and done all the time, however when they link to Experian for verification that everything's hunky dory, this is what you get:
February 16, 2006: Warning - New authorized user scheme

There is new credit repair scheme you should be aware of that involves adding an authorized user to your credit report.

Organizations are now charging, in some cases hundreds of dollars, to add people with poor credit histories as authorized users to the accounts of total strangers. The claim is that by being added as an authorized user the person will very quickly establish a good credit score. That claim is false.

Being added as an authorized user on one or even several positive accounts won't outweigh a history of negative accounts. Only good credit management over a long period of time will rebuild a person's credit history.

Further, adding total strangers with bad credit histories to your accounts puts you at tremendous financial risk and at risk of destroying your own credit history. That total stranger could decide to use your accounts to make purchases, and you would be responsible for making the payments. If you can't afford to make those payments your credit history will be damaged.

Experian in no way endorses or supports these types of organizations or claims.

Adding a family member or friend to help them establish a positive credit history can be a good thing. Adding total strangers, or paying someone to list you as an authorized user puts everyone at risk and does little to reestablish a strong credit history.

At 7/03/2007 10:31:00 PM , Anonymous Anonymous said...

Whats up with this site? Are you updating or is ot done?

At 7/03/2007 11:46:00 PM , Blogger Athena said...

sorry for the delay between posts. The day job has been brutal and overly demanding. The bubble implosion has been playing out pretty much right as we have all been expecting, so the news hasn't been news to the bloggers, just the mainstream media and joe sixpack who bought into the dumass hype of Real Estate only goes up. Anyway, thank you for asking, we will try to get regular posts and FYI news stories up and more consistent again. Thanks for reading.

At 7/08/2007 08:22:00 PM , Anonymous Anonymous said...

Here are a couple of potential flips gone bad in Santa Rosa. Both owned by Lucina Guerrero/Rafael Cortez, and listed by SUPER REALTOR, Chris Nunez. Down 20% on the first property, and most likely upside down on the 2nd after carrying costs.

Current Price: $540,000
Sales History:
03/23/2006: $680,000

559 Ironwood Ct
Current Price: $390,000
Sale History
11/26/2003: $362,000
12/18/2000: $57,500 (?)
10/08/1999: $176,000

At 7/18/2007 07:04:00 AM , Anonymous Scott Ryan said...


i would actually like you to post more often.

your some of the posts are more quality focussed

At 7/23/2007 01:20:00 AM , Anonymous Anonymous said...

Can you refer me to an active site that covers this "bubble".
Everytime I come here and see George and no new posts, I assume that that the real estate folks were right.
Do you have new stats to back up your claims?

At 7/23/2007 06:56:00 PM , Blogger Tyrone said...

Anon @
I recommend you visit and read
While it is not covering Sonoma, directly, it touches on the broader affordability, fraud, and subprime problems, which are also visible in Sonoma.

Watch this video on the sub-slime lending that was pedled by super realtor Chris Nunez:
(Past Due and Pay Day)

Use to see the growing foreclosure problem in Sonoma.

There are a lot of resources out there. Use whatever you can find, and learn.

Good luck.

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