Saturday, August 16, 2008

FBI Probes Home Buying Incentives - Was there fraud?

Like the Savings and Loan bust in the 1980s, allegations of questionable practices are now surfacing and may have contributed to the hyper growth in housing sales. Stay tuned.

The Wall Street Journal - When home sales began to slow at the start of the downturn, home builders offered buyers incentives -- instead of reducing prices -- to stimulate demand. The incentives included cars, tuition and credit-card payments, and even cash.

Now, federal investigators are questioning whether some of those incentives misled lenders and caused them to write mortgages that were artificially inflated, contributing to today's home-price crash.

Using incentives to sell homes has long been a marketing tool for builders. When properly disclosed and structured, the practice is legal. But the Federal Bureau of Investigation is looking into allegations that home builders, brokers and appraisers defrauded lenders by not disclosing unusually large incentives to buyers, which could have added as much as $100,000 to the price of a home.

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