Couldn't Happen To A Nicer Guy

In bubble markets like Phoenix and Las Vegas, we’ve heard the stories of massive mortgage fraud.  Rapidly rising appreciation made it easy to use phoney appraisals to artificially inflate home values- and enable mortgage fraud.  Once more the Austin market shows, "It doesn’t take a bubble":

The leader of a multimillion dollar mortgage fraud scheme who failed to show up for his sentencing hearing this month was sentenced to 27 years and three months in federal prison today.

U.S. District Judge Sam Sparks also ordered Corenelius Robinson, 48, to pay restitution in the case, said Assistant U.S. Attorney Mark Lane.

Sixteen people were indicted by a federal jury in Austin in January and charged with buying properties in the Austin area and then selling them to “straw buyers,” who were in on the scheme, at artificially inflated prices. The buyers defaulted on the loans and banks lost millions of dollars, most of which went to Robinson, according to court documents.

The defendants have now all been convicted and sentenced, several of them to prison terms.

Too bad most of these guys will never be caught.

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8 Comments for this entry

  1. daddymunster1 says:
    August 30, 2008 at 6:56 AM

    I agree.

  2. rooophy says:
    August 30, 2008 at 8:46 AM

    Just another example of fraud, the real question is how many times have home prices been inflated just to keep the market going. How many people are sitting on ticking timebombs in Austin? I see places like the Austonian break ground at prices that rival major cities like New York, who will pay that in Austin, are there that many people with millions in the bank?…

  3. manfre says:
    August 30, 2008 at 9:02 AM

    The article was in the San Antonio Express.

    Makes me wonder how overly inflated home prices really are (even here in Texas) and how long and severe will the decline in housing be.

    My chidren will be studying the subprime/ALT-A fallout in their history books in high school and college and so will future generations.

    Anti-spam word is “untrue”

  4. John M. says:
    August 30, 2008 at 9:26 AM

    rooophy -

    The good folks at Implode-O-Meter found this article that gives a further perspective on the prevalence of fraud.

    “Mortgage Fraud Is on the Rise, Infecting the GSEs”, by Jimmy Lathrop, SeekingAlpha, August 28, 2008.

    The Mortgage Asset Research Institute came out with its quarterly report which showed mortgage fraud is on the rise. This is curious, considering the heightened scrutiny that banks should be making during the “credit crunch”. I just wanted to point out that the states which show the highest incidence of fraud are the same states which have eliminated the attorney and have substituted “settlement companies” staffed by non lawyers.

  5. brucewho says:
    August 30, 2008 at 10:32 PM

    Here I am again with my drunken commentary on the ongoing and irrevocable situation in the La La land of high finance and misdemenors.

    Which is worse my friends? Low life fraud or high life corruption. Which is it? The chicken or the egg? Who started this? Does it really matter how wholey effed we are. Who you gonna call? Ain’t enough prison cells and no gumption to prosecute. Our white knight spitzer was proved too human and full of ego. They brought him down. Go ahead and bitch about it but it’s really who we are. An incredibly venal narsicsitic society on the verge of collapse. Enjoy the rest of your holiday.

  6. John M. says:
    September 1, 2008 at 5:48 AM

    twist -

    I’m dipping my toes into the shallows of the exposure draft of Calomiris’ Jackson Hole paper (long PDF) and he provides a nice epitaph for the present housing bust (pp. 12-13):

    The desire to avoid visible budgeted costs in favor of hidden guarantee costs seems to be a consistent theme in political history. That has an important consequence: the powerful political interests that favor real estate subsidies receive their government largesse in a form that promotes financial instability.

  7. twist says:
    September 1, 2008 at 6:32 AM

    John-

    I believe the correct name for that political philosophy is “Eat, drink and be merry, for tomorrow we die.”

    “Stupid or crooked?” is a question I’ve asked myself time and again. I think for the most part it’s really been that the politicians know there will be problems down the road, but we need to votes now, and we’ll deal with the consequences later.

    What we need are more statesmen- men and women interested in bettering things for their fellow man- and a lot fewer politicians- who can’t seem to think past the next election.

  8. brucewho says:
    September 1, 2008 at 10:03 PM

    Twist,

    I absolutely concur, however I don’t believe we as a species will ever be able to rid ourselves of this foible. We’re all quilty of it in one way or another. Once we get a taste of the good life, even if its borrowed, which is our present situation, we will borrow and borrow and borrow and …. until Daddy takes the credit card away. Have Americans stopped using their plastic? No,they will till everyone is maxed out. This is a metaphor for the Feds, Banks, Corporations and eveyone else that is trapped in over borrowing. It’s not going to ever be paid back IMHO. Look out hyperinflation!

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