Commodities are items of value and uniform quality produced in large quantities and sold in an open market. Although every residential real estate property is unique, these properties became uniformly desired by investors because all real estate prices rose during the Great Housing Bubble. The commoditization of real estate and the active, open-market trading it inspires caused houses to lose their identity as places to live and call home. Houses became tradable stucco boxes similar to baseball playing cards where buying and selling had nothing to do with possession and use and everything to do with making money in the transaction.
In a commodities or securities market, rallies unsupported by valuation measures will fall back to fundamental values. It is very clear the rally in house prices was not caused by a rally in the fundamental valuation measures of rent or income. Many people forgot the primary purpose of a house is to provide shelter — something which can be obtained without ownership by renting. Ownership ceased to be about providing shelter and instead became a way to access one of the world’s largest and most highly leveraged commodity markets: residential real estate.
Commodities markets are notoriously volatile. In fact, this volatility is the primary draw of commodities trading. If market prices did not move significantly, traders would not be interested in the market, and liquidity would not be present. Without this liquidity, hedgers could not sell futures contracts and transfer their risk to other parties, and the whole market would cease to function. Commodities markets exist to transfer risk from a party that does not want it to a party who is willing to assume this risk for the potential to profit from it. The commodities exchange controls the volatility of the market through the regulation of leverage. It is the exchange that sets the amount of a particular commodity that is controlled by a futures contract. They can raise or lower the amount of leverage to create a degree of volatility attractive to traders. If they create too much leverage, trader’s accounts can be wiped out by small market price movements. If they create too little leverage, traders lose interest.
The same principles of leverage that govern commodities markets also work to influence the behavior of speculators in residential real estate markets. If leverage is very low (large downpayments or low CLTV limits,) then speculators have to use large amounts of their own money to capture what become relatively small price movements. If leverage is very high (small downpayments or high CLTV limits,) then speculators do not have to put up much money to capture what become relatively large price movements. The more leverage (debt) that can be applied to residential real estate, the greater the degree of speculative activity that market will see. Also, the smaller the amount of money required to speculate in a given market, the more people will be able to do so because more people will have the funds necessary to participate. When lenders began to offer 100% financing, it was an open invitation to rampant speculation. This makes the return on investment infinite because no investment is required by the speculator, and it eliminates all barriers to entry to the speculative market. In a regulated commodities market, the trader is responsible for all losses in their account. In a mortgage market dominated by non-recourse purchase money mortgages, lenders end up assuming liability for losses in the speculative residential real estate market. This is a fantastic deal for speculators; for the lenders... not so much.
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Today's featured property is a classic example of speculation in the residential real estate market. When this seller was a buyer, they utilized 100% financing right at the peak of the bubble. Now that resale values have gone south, the speculator is letting the property go into foreclosure, and the lender is going to be left holding the bag.
Terrific Location in Irvine--conveniently close to parks, schools, shopping, dining and entertainment. Beautiful landscape/hardscape done by professionals in the backyard. Hardwood floors throughout first floor.
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If the lender gets the asking price on this one, they stand to lose $192,500 after a 6% commission. This also assumes the borower is current on the mortgage and there is not a large amount of deferred payments adding to the balance due. All part of the price these lenders paid for enabling people to trade houses as commodities and assuming the risk of loss.
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God money Ill do anything for you.
God money just tell me what you want me to.
God money nail me up against the wall.
God money dont want everything he wants it all.
Head like a hole.
Black as your soul.
Id rather die than give you control.
Head like a hole.
Black as your soul.
Id rather die than give you control.
Bow down before the one you serve.
Youre going to get what you deserve.
Bow down before the one you serve.
Youre going to get what you deserve.
God moneys not looking for the cure.
God moneys not concerned with the sick among the pure.
God money lets go dancing on the backs of the bruised.
God moneys not one to choose
No you cant take it
No you cant take it
No you cant take that away from me
Beds: 2
Baths: 2
Sq. Ft.: 1,000
Lot Sq. Ft.: 2,800
Year Built: 1976
Stories: 1
Type: Condominium
County: Orange
Neighborhood: El Camino Real
$/Sq. Ft.: $380
MLS#: S485757
Status: Active on market
On Redfin: 40 days
From Redfin, "Single story home in a corner lot overlooking a huge greenbelt. Beautifully remodeled throughout. This is an as is short sale."
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This short sale price will probably not be approved by the lender as it is too far outside of their loss limitation guidelines. It is probably priced this low to entice bids in order to give the bank an idea of where the market will be after they take the property back in foreclosure. The bank will lose money, but they will follow their guidelines for loss mitigation which will not permit a 30% haircut after a little over 7 months.
In my opinion the real story here is probably in the sale history:
Sales History
Date Price
10/12/2006 $515,000
10/27/2005 $465,000
08/01/2000 $218,000
It appears to me the buyer on 10/12/2006 was a straw buyer bailing out the 10/27/2005 buyer. The $515,000 sales price, after a 6% commission, would net this seller $20,000 -- enough for a payment to a straw buyer and/or the person who arranged the sale. This is pure speculation on my part, and the previous seller may simply have gotten lucky, but when you see a short sale after 7 months, it is probably a first-payment default fraud. This may be a flip gone flop, or it may be fraud, either way this never should have transacted at a price over $500,000, and its next transaction (after the bank buys it at a foreclosure auction) will likely be less than the 2005 price.
The sellers who will really be displeased by this whole mess are the neighbors. The above sale won't feed their fantasy price, but then again, they probably will ignore its significance as an aberration, drink some kool aid, and deepen their denial.
Beds: 3
Baths: 2
Sq. Ft.: 1,178
Lot Sq. Ft.: 3,035
Year Built: 1976
Stories: 1
Type: Condominium
County: Orange
Neighborhood: El Camino Real
$/Sq. Ft.: $480
MLS#: P579755
Status: Active on market
On Redfin: 7 days
Back in October, we did a post on a property in North Park and discovered some fraud going on. Even Casey Serin stopped by and posted a comment. Recently, I've gotten some excellent leads on even more fraud going on in Irvine and beyond. I'd like to thank graphrix, brealiving, and IrvineMom for all their help in uncovering this. This thread in our forums was extremely helpful.
Figuring out how all the fraud is connected is a lot of work. Writing a post to explain it is even more difficult. So please accept my apologies if this is hard to follow. Also, because I'm convinced there is something shady going on here, I'm not going to go through the extra work of jumbling names, etc. It's all public information anyways.
OCRenter at Bubble Tracking and his readers have made some inroads as far as getting the Main Stream Media to notice what's being said on the blogs (regarding flippers, fraud, etc.). Hopefully, we can get some exposure to this story as well.
So let's begin!
*** GROUP 1 - CHAPA, HUSSAIN, YEASMIN, MOZUMDER *** It appears this group of people purchased 7 homes in North Park in late 2005 and early 2006. Here are the details:
71 Avondale (MLS I703478) - Listed at $725,000 - Short sale
- Purchased by Nurer Chapa and Moktadul Hussain on 12/28/2005 for $735,000
43 Modesto (MLS I703441) - Listed at $750,000 - Short sale
- Purchased by Nurer Chapa and Moktadul Hussain on 12/29/2005 for $750,000
86 Sorenson (MLS I703639) - Listed at $630,000 - Short sale
- Purchased by Nurer Chapa and Moktadul Hussain on 12/22/2005 for $735,000
78 Sorenson (MLS I703654) - Listed at $630,000 - Short sale
- Purchased by Marina Yeasmin and Helal U Mozumder on 10/13/2005 for $715,000
5 Winterfield (MLS I703388) - Listed at $709,000 - Short sale
- Purchased by Marina Yeasmin and Helal U Mozumder on 11/22/2005 for $726,000
1 Thorn (MLS I703426) - Listed at $875,000
- Purchased by Marina Yeasmin, Helal U Mozumder, Moktadul Hussain, and Nurer Chapa on 10/27/2005 for $840,000
63 Modesto - Purchased by Nurer Chapa and Moktadul Hussain on 3/15/2006 for $715,000
- Transferred to Crossroads Enterprises Inc on 11/28/2006
You can see how the property at 1 Thorn ties all 4 of these people together (it looks like they are 2 couples). Also, ALL 7 of these properties were purchased on 100% financing. The 6 properies that are on the market are listed by Darlene Gallegos of Century 21 Beachside (just click on the links and you'll see this). Of the 6 that are listed, 5 of them say they are short sales in the private remarks.
*** GROUP 2 - SCHUMACHER, YEASMIN, HOQUE *** Here we have 4 more homes in North Park that are linked together:
3 Del Mar #10 (MLS I703772) - Listed at $870,000
- Purchased by Sabina Yeasmin on 4/27/2005 for $750,000
- Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005
81 Sorenson (MLS I703686) - Listed at $725,000 - Short sale
- Purchased by Sabina Yeasmin on 5/26/2005 for $700,000
- Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005
47 Middlebury - Purchased by Mansurul Hoque on 4/28/2005 for $745,000
- Transferred to a revocable intervivos trust in the name of David Schumacher via a Warranty Grant Deed on 9/19/2005
12 Apple Valley - Puchased by Mansurul Hoque on 10/16/2006 for $869,000
So how is Group 1 linked to Group 2? There are a few connections although I'll be the first to admit they are kind of loose. First, the Sabina Yeasmin in Group 2could be related to the Marina Yeasmin in Group 1. Second, 81 Sorenson in Group 2 is practically next door to 78 Sorenson and 86 Sorenson in Group 1. Third, the agent listing the properties in Group 2 is also listing the properties in Group 1. What do you think?
David Schumacher is the common element here in Group 2. Anyone know what a revocable intervivos trust or a Warranty Grant Deed is? All 4 of these homes were purchased using 100% financing. Also, I don't have any info on Hoque's properties. Does anyone know if there is a NOD on them? If not, they could be legitimate.
*** GROUP 3 - HOSSAIN, CHOWDHURY, UDDIN ***
11 Solstice - On Foreclosure.com
- Purchased by Shapna and Khoka Hossain on 7/31/2006 for $950,000
- Transferred to First Capital Investments Inc on 11/28/2006
1 Armory - On Foreclosure.com - Purchased by Manik Chowdhury on 5/9/2006 for $735,000
- Transferred to First Capital Investments Inc on 11/28/2006
68 Arcata - On Foreclosure.com
- Purchased by Manik Chowdhury on 5/9/2006 for $720,000
- Transferred to First Capital Investments Inc on 11/28/2006
39 Modesto - On Foreclosure.com
- Purchased by Giash Uddin on 7/31/2006 for $720,000
- Transferred to First Capital Investments Inc on 11/28/2006
Here, the common link is First Capital Investments Inc. All 4 of these properties are listed on Foreclosure.com. They were all transferred to First Capital Investments on 11/28/2006. They were all initially purchased with 100% financing. Some of you may have noticed that the last propety, 39 Modesto, is the one that started the original fraud post back in October (yup, Shagi Indud = Giash Uddin). Apparently, all of Giash's properties were transferred to First Capital Investments as well. Thanks to someone who may want to remain anonymous, I've come to find that there are 16 properties (7 from Giash, 3 from Group 3, and 6 others) that are owned by First Capital! And almost all of them are NOD!
Ok, we've got 11 homes in Groups 1 and 2 that could be connected. And we've got possibly 16 homes in Group 3. But is there a link between Group 3 and Group 1? Well, after a little bit of digging, I found out that the address for First Capital Investments AND Crossroads Enterprises is the SAME on the property records! Crossroads Enterprise is the entity that is on the title of 63 Modesto in Group 1. The address for both of these companies is: 25202 CRENSHAW BLVD STE 301, TORRANCE CA 90505.
That's possibly 27 properties that may be intertwined in some sort of fraud!
Now what? Time to dig up what we can on these corporations. I've got some leads from a source who may want to remain anonymous. Apparently, First Capital Investments may be incorporated in Nevada. If anyone has information on these companies, please email me (zovall at gmail dot com) or post a comment. I'll try to do a follow up post but it may take a while.
Just a quick note to check out the recent story on ocrenter's blog: Fraudera Ranch: It's a Family Affair. The tactics used here may be pretty similar to the fraud I uncovered last year.
Let's get some exposure to what ocrenter, Graphrix, Anon Investigator, and Ladera Mom have uncovered! Here's a link to Digg their story: Fraudera Ranch
Thanks to a tip from ocjohn, I've come across what looks like just an investment gone wrong at first glance. Upon further research I've found an even more interesting situation. Any personal names in this post have been jumbled for obvious reasons.
The property we'll start with is 39 Modesto which is a detached condo in the San Simeon tract in Northpark. It was purchased using 100% financing on 7/31/2006 for $720,000 and rented out for $2850/month on 8/23/2006.
Let's pause and take a look at what a great investment this is. Assuming a 6% Interest Only loan for the whole amount, the payments are $3600/month. After adding in HOA fees of $206/month and Property Tax (including Mello Roos) of $800/month, this 'investor' is going to be negative at LEAST $1750/month. This by itself is post worthy but read on to see how crazy this gets.
I became curious and wondered if this 'investor' (let's call him 'Shagi Indud') made any other great moves. I was surprised to find out that Shagi owns FOUR properties in Orange County *AND* THREE properties in Los Angeles County:
7/10/2006 - $854,000 - 444 Ponce Ave. Placentia, CA 92870
Lender: BNC Mortgage $854k
Seller: Alalanaa Bizza
Purchased 11/30/2005 - $677,000
Lender: DBA Westworks Mortgage $541,580 / Hic Star Corp $135,395
7/20/2006 - $600,000 - 12301 Rives Ave. Downey, CA 90242
Lender: Encore Credit Corp. $480k/$120k
Seller: Leda and Racal Bizza
Purchased 2/22/2005 - $460,000
Lender: BNC Mortgage $459,900
Refinanced: Southcoast Loans & Mortgage $440k and $110k
7/20/2006 - $735,000 - 1885 Gladys Ave. Signal Hill, CA 90755
Lender: First Franklin $588k/$147k
Seller: Drianna Bizza
Purchased 4/1/1997 by Barache Daafy (I couldn't locate the transfer to Drianna Bizza)
7/31/2006 - $720,000 - 39 Modesto Irvine, CA 92602
Lender: Resmae Mortgage Corp $576k/$144k
Seller: Red Abo Henc and Hunshiy Gnaw
Can't locate prior purchase information
8/7/2006 - $685,000 - 860 Buttonwood Dr. Brea, CA 92821
Lender: Aegis Funding Corp $548k/$137k
Seller: Nanda Bizza
Purchased 3/23/2006 - $635,000
Lender: Encore Credit Corp $508k/$127k
8/14/2006 - $1,250,000 - 10258 Hasty Ave. Downey, CA 90241
Lenders: 1st Choice Mortgage $1000k / Cameron Financial Group $250k
Seller: Leda and Racal Bizza
Purchased 10/31/2003 - $485,000
Lender: BNC Mortgage $485k
Refinanced 11/4/2004 - $593,750 - New Century Mortgage Corp
8/21/2006 - $850,000 - 920 E. Bastanchury Rd. Placentia, CA 92870
Lender: Axiom Financial Services $680k/$170k
Seller: Alalanaa Bizza
Purchased 12/7/2005 - $666,000
Lender: BNC Mortgage $532,720 / $133,180
Now there are several things that scream out as being suspicious:
- ALL 7 properties were purchased with 100% financing
- ALL 7 properties closed within about 40 days
- ALL 7 properties were funded by different lenders
- 6 of the 7 properties were purchased from the Bizza family
I haven't yet researched all the purchases by the Bizza family but I noticed that some of them were bought less than a year ago and then flipped to Shagi. Is there any way this could be legit? Is Shagi Indud even real? If so, Shagi Indud is in deep doo-doo with his 100% financed debt of $5,694,000!
UPDATE: I've updated this post with any purchase/refinance information by the Bizza family I was able to find on the homes that were flipped to Shagi. The Bizza family also bought everything on 100% financing. There is definitely something fishy going on here. Take a look at how quickly some of these properties (1,2,5 and 7) were flipped. I wonder who the loan broker for Shagi was? That person must have made a ton of shady money as well.
God money Ill do anything for you.
Assuming a 6% Interest Only loan for the whole amount, the payments are $3600/month. After adding in HOA fees of $206/month and Property Tax (including Mello Roos) of $800/month, this 'investor' is going to be negative at LEAST $1750/month. This by itself is post worthy but read on to see how crazy this gets.
