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Statistics don’t lie

National Mortgage Professional
Mar 24, 2014

Statistics don’t lieJoe Cornostate economy, bank liquidation sales, watch group

My wife inspired this article when we entertained some out-of-state guests. Some are from California, some from West Virginia and some from Kentucky. My wife reminded me of a statement made by one of the Californians. The statement was: "Your state economy is doing better because I do not see the bank liquidation sales being done on projects as in California."

All of the guests know who I am and what I do for a living, because most have me train their personnel, so the mortgage industry demise is always a topic in any group that I venture into. The remark sparked a memory from when I wrote an article about the falsehood that Utah was first or second, depending on the year, in the nation for fraud. I wrote that Utah was not truly worse in people performing fraudulent acts, but that Utah was better at reporting and prosecuting fraud than other states and that the statistics were skewed. With time, statistics do not lie. We only need to look at the larger impact of foreclosures and liquidation sales being realized in other states for the true evidence in support of my statement.

It was interesting that only a few states printed my article (Utah being one of them), because the industry was not sick in May 2006. Were we healthy? Maybe the statistics were being skewed due to lack of management, enforcement and prosecution of people performing fraudulent acts.

Perhaps we could have "kept on going" a little longer if the major players in the industry performed a more compassionate and gradual change in lending policy rather than pulling the rug from under most independent brokers. Whatever the motivation for the change of industry, it is the time-tested evidence that truly represents the real statistics. I have always stated that greed motivates fraud, and stricter penalties and punishments need to be implemented and enforced. As long as each state is performing the investigations and prosecutions, the figures are going to be skewed. I am not suggesting that a larger federal agency take on such duties; this would make things even worse.

In the mist of federal recommendations (the U.S. Department of Housing and Urban Development is attempting some foolish effort to "force the truth" through disclosure), fraud will continue to create opportunities for people.

What I am recommending is the various local organizationscounty charters of real estate agents or mortgage lenderscreate and implement their own task force to assist the states in discovering and prosecuting such. Local businesses know when something is not right. Local groups know the people involved and have past knowledge and experience of individuals involved.

I have a local Utah example where local banks, real estate agents and lenders stayed away from a development that ultimately was busted for fraud at many levels. False valuing was easily detectable to locals in the area. It made major press coverage and people are facing major time for their acts.

However, more impressive than the results of trail and prison time is the distain and the preventative measures taken by the local commerce years before the cases were filed. The local economies are strong because the local commerce knew their industry. This statistic is burning its truth in the amount of locally-funded vs. national/international-funded projects impacting states nationwide.

It makes great sense to have local charters, chapters and groups act as the watchful eye for their local economy, reporting up to state officials to investigate and respond before an entire state is in financial distress. All I can say to the states so heavily impacted with the mortgage industry dastardly deeds is to look at your state enforcement and investigation agencies and get them working effectively, so that you can prevent future catastrophic effects.

I am sure that every state had good, honest business people contacting their state agencies on potential concerns of fraud. However, greed is the main motivator, even at the state level. It needs to be mandatory that all local contacts and requests are investigated and the potential offenders be contacted so that they know they are being checked on. Why not! The time of not alerting the crook has proven statistically unsuccessful.

If potential offenders were notified that a watch group has initiated a state investigation, two things will take place: The true and honest operations will invite the inquiry and the cheaters will go deeper to hide themselves. You know what they do. They close the targeted operation down and open up with a new name and location. However, the local watchdogs know the individuals and see them at the movies, the store, the baseball games, etc.

Local watch groups could notify state agencies on such transfers of interest and operations so that the individuals can be monitored. This is not a McCarthy list. Wasn't that at the federal level? Just another example of large agency failure where local groups would know who supports their communities. Local groups care about their local economies because they want their children and grandchildren to live there.

We get the "we need to protect people from local bias and prejudice" statement whenever larger agencies are taking control over local commerce. Well, guess what? After decades of scourging bias and prejudice out of the entire nation, state-by-state, hate crimes have increased. Local watchdogs and reporting on gangs and hate crimes will work much better than any federal or state agency.

The local authorities know the individuals involved and are more concerned locally. So there it is: An "atypical" article differing from the wave of control freaks attempting to protect the American dream.

I have seen states restrict or outlaw some lending practices, only to have major industry players leave their state. If the states would not have buckled under to the big box players, their state could have been financially healthier today, but that is another statistic that is being proven with time, as well.

Joe Corno is president of Utah-based We Be Consulting and Seminars. He may be reached at (801) 836-2077 or e-mail [email protected].

Published
Mar 24, 2014