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How deft bid-riggers harmed ex-owners of foreclosed homes

5 points by aceperry 12y ago

ChuckMcM 12y ago
Seems a shame to put people ripping off banks in jail, but not bankers ripping off people. That said, I attended a couple of the forclosure auctions in San Jose and it would be clear to a elementary school kid that something fishy was going on amongst the bidders. But like it said in the article, there isn't really a whole lot of rule making here as far as I could tell.
- FireBeyond 12y ago
  And by ‘ripping off banks’ you also mean ‘ripping off people who’ve also lost their homes’, right?
  - ChuckMcM 12y ago
    Actually no, that is not what I mean. I do understand that at the heart of a foreclosure there is someone who lost their home, but by and large these are 'mortgage meltdown' foreclosures. There is negative equity in the house (its worth less than the note on it). In every instance I've seen (but acknowledge that isn't all) the original purchaser is no longer making payments (either they can't afford it or they choose not to make payments on a house that is worth less than the mortgage) and so the original purchaser is just waiting for the loan forgiveness. They are going to get that out of the transaction no matter what.
jack-r-abbit 12y ago
The article kind of contradicts itself. At one point it makes the following claim (which is also implied by the article title): The foreclosed homeowners are the ultimate victims of the bid-rigging, federal investigators said. Any money earned at auction beyond the debt owed on the house is supposed to be returned to the former owner. But then goes on to say: As banks felt the burden of holding so many homes, they held a fire sale and began asking even less than what was owed on the properties. In 2009, the average asking price dropped 57 percent below what was owed on the homes, according to Property Radar. These heavily discounted homes flooded the auctions. If the bank is getting less than they are owed then the foreclosed homeowners were never going to see any money anyway since there was no extra. Those homes were going to be purchased below debt level regardless of who was bidding and whether they were going to flip it right away to "the Group." Banks are not in the real-estate business. They are in the money business. Most foreclosure sales are the bank trying to cut its losses. They can write off a few grand easier than a few hundred grand.

5 points by aceperry 12y ago

Seems a shame to put people ripping off banks in jail, but not bankers ripping off people. That said, I attended a couple of the forclosure auctions in San Jose and it would be clear to a elementary school kid that something fishy was going on amongst the bidders. But like it said in the article, there isn't really a whole lot of rule making here as far as I could tell.

FireBeyond 12y ago
And by ‘ripping off banks’ you also mean ‘ripping off people who’ve also lost their homes’, right?
- ChuckMcM 12y ago
  Actually no, that is not what I mean. I do understand that at the heart of a foreclosure there is someone who lost their home, but by and large these are 'mortgage meltdown' foreclosures. There is negative equity in the house (its worth less than the note on it). In every instance I've seen (but acknowledge that isn't all) the original purchaser is no longer making payments (either they can't afford it or they choose not to make payments on a house that is worth less than the mortgage) and so the original purchaser is just waiting for the loan forgiveness. They are going to get that out of the transaction no matter what.

jack-r-abbit 12y ago

The article kind of contradicts itself. At one point it makes the following claim (which is also implied by the article title): The foreclosed homeowners are the ultimate victims of the bid-rigging, federal investigators said. Any money earned at auction beyond the debt owed on the house is supposed to be returned to the former owner. But then goes on to say: As banks felt the burden of holding so many homes, they held a fire sale and began asking even less than what was owed on the properties. In 2009, the average asking price dropped 57 percent below what was owed on the homes, according to Property Radar. These heavily discounted homes flooded the auctions. If the bank is getting less than they are owed then the foreclosed homeowners were never going to see any money anyway since there was no extra. Those homes were going to be purchased below debt level regardless of who was bidding and whether they were going to flip it right away to "the Group." Banks are not in the real-estate business. They are in the money business. Most foreclosure sales are the bank trying to cut its losses. They can write off a few grand easier than a few hundred grand.