Construction Owners & Builders Law Blog

Some homebuilders and developers regrettably were involved in the massive mortgage fraud that helped trigger the present recession.

 A  Federal Financial Institutions Examination Council (FFIEC) White Paper (PDF) labels one common scheme the "Builder Bailout." and describes it as follows: 

A builder bailout occurs when a builder, who has unsold units in a tract, subdivision, or condominium complex, employs various fraudulent schemes to sell the remaining properties. In stressed economic or financial conditions, a builder may be pressured to liquidate remaining inventory to cover financial obligations. To sell the remaining properties, the builder may use a variety of tools including, but not limited to, hidden down payment assistance or excessive seller concessions to elevate the sales price. As a result of the scheme, the unsuspecting financial institution is often left with a loan secured by inflated collateral value and the “real” loan-to-value is greater than 100 percent.

"To listen to talk radio, to watch TV pundits, to read a newspaper's online message board, is to realize that increasingly, we are a people estranged from critical thinking, divorced from logic, alienated from even objective truth. We admit no ideas that do not confirm us, hear no voices that do not echo us, sift out all information that does not validate what we wish to believe. I submit that any people thus handicapped sow the seeds of their own decline; they respond to the world as they wish it were rather to the world as it is."