Fraud Reported in Program to Help New Homebuyers

http://www.nytimes.com/2009/10/23/us/politics/23housing.html?hp

Just as Congressional leaders are calling to extend a popular $8,000 tax credit for first-time homebuyers, or even to expand it to all home purchasers, government investigators are reporting new findings that point to widespread abuse and errors in the program.

A new report from the Treasury Department’s inspector general said that as of Sept. 30 the Internal Revenue Service had identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations. In late July, the I.R.S. announced its first successful prosecution, of a tax preparer.

While government officials said many suspected abuses could turn out to be simple errors, the Treasury investigation found examples of claimants who pretended to be first-time buyers when they already owned homes, or had not yet purchased one. Some claims were filed for children as young as 4 years old.

Click to expand...

Massive social program hemorrhages money due to fraud - there's a shocker. At least we've learned our lesson from this and aren't discussing an expansion of another massive social program any time soon. :2razz:

In all seriousness though, I'm glad that Obama isn't supporting an expansion of this, and hope that this article gives him the push he needs to end it altogether.

Of 1.4 million claimants to nearly $10 billion in credits, 60 percent had incomes below $50,000, raising questions about whether some of them could afford a home.

The $8,000 credit is available to individuals earning up to $75,000 a year and couples with income up to $150,000; people above those limits can get smaller benefits but the credit phases out at $95,000 for individuals and $170,000 for couples. It is a refundable credit, so taxpayers get a check for any amount beyond their tax liability.

Click to expand...

This might sound bad, but why on earth was this program open to people with incomes below a certain level? $50k is enough to buy a home in many places, but you'd think they'd refuse to offer the credit to people making less than, say, $30k.

If we have a housing crisis created by people buying houses that they couldn't afford, it seems kind of stupid to try to fix it by incentivizing people to buy houses that they can't afford.

I agree. The program should have been harnessed (hindsight though) as an incentive. The logic of the program was to shift demand via taxation, which i can rightfully agree with. But in the end, it is essentially the banks who make final lending decisions, and to a lesser extent quasi government underwriters.

You would think proper risk management practices such as denying loans to someone who's monthly payments would have eclipsed greater than 25% of their income would emerge.

I have no problem with someone getting a $100,000 fixed 30yr loan under 6% when their income is around $30k.

I'm really glad this got caught quickly. And I'm surprised it got caught quickly.

I find it sad how people rush to abuse programs to help people. I had some friends who did several months volunteer work in New Orleans, and some of the stories they told are just insane the fraud and abuse of programs to help those who need it.

Redress said:

I find it sad how people rush to abuse programs to help people. I had some friends who did several months volunteer work in New Orleans, and some of the stories they told are just insane the fraud and abuse of programs to help those who need it.

Click to expand...

The people that these programs are designed to help are usually the folks that abuse them the most.

Redress said:

I find it sad how people rush to abuse programs to help people. I had some friends who did several months volunteer work in New Orleans, and some of the stories they told are just insane the fraud and abuse of programs to help those who need it.

Click to expand...

I had a friend who quit Americorps for this exact reason. He said that the process of getting reimbursements for nearly anything was so easy that it amounted to free money. People were getting reimbursed for trips to vegas, booze, etc. without the slightest bit of oversight.

apdst said:

The people that these programs are designed to help are usually the folks that abuse them the most.

Click to expand...

Not entirely, but close enough. I can't imagine doing something like this, I just don't understand the mindset.

Redress said:

Not entirely, but close enough. I can't imagine doing something like this, I just don't understand the mindset.

Click to expand...

It's the welfare class. They can rationalize anything, no matter how wrong it is.

apdst said:

It's the welfare class. They can rationalize anything, no matter how wrong it is.

Click to expand...

Sigh...you remind me sometimes of how some one on this board described Rush. He would say something rational, then say something a little more out there, and then say something totally outrageous. This comment is that end part of the process. Really, get out and meet some of that "welfare class". While there are some who would take advantage of any opportunity, there are others who are trying to get their life together in difficult situations, frequently with everything against them. That single mother who got pregnant in high school because she was stupid(and every one is stupid in some ways in high school), desperately trying to raise her child or children as best she can in a neighborhood where there is nightly gunfire and other kids are out there selling crack, but who is not selling drugs, or herself, or robbing people is not some one who deserves to be part of a blanket condemnation.

Further, for every poor person taking advantage of the system, there is a rich guy doing it as well.

Redress said:

Sigh...you remind me sometimes of how some one on this board described Rush. He would say something rational, then say something a little more out there, and then say something totally outrageous. This comment is that end part of the process. Really, get out and meet some of that "welfare class". While there are some who would take advantage of any opportunity, there are others who are trying to get their life together in difficult situations, frequently with everything against them. That single mother who got pregnant in high school because she was stupid(and every one is stupid in some ways in high school), desperately trying to raise her child or children as best she can in a neighborhood where there is nightly gunfire and other kids are out there selling crack, but who is not selling drugs, or herself, or robbing people is not some one who deserves to be part of a blanket condemnation.

Further, for every poor person taking advantage of the system, there is a rich guy doing it as well.

Click to expand...

Amen, Redress. Fraud is wrong, whether it's done by someone rich or poor. Striped down, the Wall Street fall can be blamed on greed, just like the idiots in this story that are ruining a good program.

What! Fraud and theft from an ineffective government give away program!? Surely you jest!

Middleground said:

Amen, Redress. Fraud is wrong, whether it's done by someone rich or poor. Striped down, the Wall Street fall can be blamed on greed, just like the idiots in this story that are ruining a good program.

Click to expand...

While greed can be a nasty component, Wall Streets "correction" was more so based on "animal spirits". Many aspects of market correction are based upon survival. I have little doubt there can be some instances of system abuse related to necessity, although that does not entirely excuse them of their wrong doing.

RightinNYC said:

http://www.nytimes.com/2009/10/23/us/politics/23housing.html?hp



Massive social program hemorrhages money due to fraud - there's a shocker. At least we've learned our lesson from this and aren't discussing an expansion of another massive social program any time soon. :2razz:

In all seriousness though, I'm glad that Obama isn't supporting an expansion of this, and hope that this article gives him the push he needs to end it altogether.




This might sound bad, but why on earth was this program open to people with incomes below a certain level? $50k is enough to buy a home in many places, but you'd think they'd refuse to offer the credit to people making less than, say, $30k.

If we have a housing crisis created by people buying houses that they couldn't afford, it seems kind of stupid to try to fix it by incentivizing people to buy houses that they can't afford.

Click to expand...

$50 K for a house!!

My 2 bedroom apartment is worth $300,000!!

But here we would not be questioning aiding low income earners because they are part of our national view of ourselves - "the little Aussie battler".

Surely there are "American battlers" who try their best to get ahead, who scrimp and save every penny to put a roof over their children's heads?

Ikari said:

What! Fraud and theft from an ineffective government give away program!? Surely you jest!

Click to expand...

It is not the fact that it is occurring - what should be reassuring is that it is being caught

This is what brought on the economic meltdown. The same crooks in Congress are bound and determined to finish the job. The FHA is now bankrupt. The FDIC is out of money. We own half a dozen companies as U.S. taxpayers. The Congress evidently cares not one whit about the pending bankruptcy of the United States. As far as I am concerned they are part of the criminal class.

I asked my banker one time what happened. Her response simply was this. There are people who should never have been home owners in the first place. All of this do-gooder nonsense is what put us into the soup to begin with. People who can repay loans would not have brought this calamity upon us. After the deadbeats and crooks dipped their grubby fingers into the public purse we were doomed. It is just a matter of when. Moody's says we will be bankrupt as a nation in less than five years.

The abuse of this program was predicted pretty much immediately on tax preparation forums. EIC is a largely abused program, and an $8,000 refundable credit is more than EIC, and requires less information on the preparation of a tax return. One thing they could have done to reduce the fraud would have been to require the HUD-1 be sent with the tax return.

apdst said:

The people that these programs are designed to help are usually the folks that abuse them the most.

Click to expand...

Hey, it's free!!!


*mob rushes in trampling the announcer*

American said:

Hey, it's free!!!


*mob rushes in trampling the announcer*

Click to expand...

'Obama money' will do that to you......

bowerbird said:

$50 K for a house!!

My 2 bedroom apartment is worth $300,000!!

Click to expand...

Back where I grew up, you can buy houses in crappy areas for almost nothing. Ex.

MLS ID#: 206590 - Residential Real Estate | Utica, NY 13501

$21,500 for a 4 BR/1.5 Bath.

Now, living in the city, it's a little different. :lol:

But here we would not be questioning aiding low income earners because they are part of our national view of ourselves - "the little Aussie battler".

Surely there are "American battlers" who try their best to get ahead, who scrimp and save every penny to put a roof over their children's heads?

Click to expand...

We still have these, though it seems like it's becoming less common.

RightinNYC said:

Back where I grew up, you can buy houses in crappy areas for almost nothing. Ex.

MLS ID#: 206590 - Residential Real Estate | Utica, NY 13501

$21,500 for a 4 BR/1.5 Bath.

Now, living in the city, it's a little different. :lol:



We still have these, though it seems like it's becoming less common.

Click to expand...

I'll bet it is cheap in Detroit, especially a foreclosure.....

Missouri Mule said:

This is what brought on the economic meltdown. The same crooks in Congress are bound and determined to finish the job. The FHA is now bankrupt. The FDIC is out of money. We own half a dozen companies as U.S. taxpayers. The Congress evidently cares not one whit about the pending bankruptcy of the United States. As far as I am concerned they are part of the criminal class.

I asked my banker one time what happened. Her response simply was this. There are people who should never have been home owners in the first place. All of this do-gooder nonsense is what put us into the soup to begin with. People who can repay loans would not have brought this calamity upon us. After the deadbeats and crooks dipped their grubby fingers into the public purse we were doomed. It is just a matter of when. Moody's says we will be bankrupt as a nation in less than five years.

Click to expand...

MM - from what I understand the underlying driver of this mess was less "do gooder nonsense" and more "straight out disgusting corporate greed"

bowerbird said:

MM - from what I understand the underlying driver of this mess was less "do gooder nonsense" and more "straight out disgusting corporate greed"

Click to expand...

But the genesis of this was the changing of federal law and politics which wanted to move the underlying home ownership rate from about 65-66% up to closer to 70 or 75%. In so doing the standards were loosened and many people who had no business or intention or just plain speculators jumped in on this "easy money" train to reap the rewards of government intervention. No rational businessman or woman would lend money knowing that there was little or no chance of getting it back. You wouldn't. I wouldn't. Nobody does this. But once the government gets involved all kinds of unintended consequences happen. This is not new. It happens all the time in wars. War profiteers come along to put out inferior material at inflated prices. We had cannons manufactured during our civil war that blew up because they were made of inferior metal but the government was paying the freight so they got by with it. The crooks today who milked the housing system just flew under the radar and made off like bandits.

Criminality moves in whenever there is money involved. When it is said that money is the root of all evil, believe it. It is still true.

So my statement about the "do-gooder" legislation is still valid. If not for the loosened standards of the housing market we wouldn't have had the economic melt-down where crooks dreamed up the unfathomable "CDO's" to market around the world which turned out to be worthless based on hugely inflated home values. I used to sit in front of my television set and view "Flip this House" on HGTV where people would speculate on shacks in California for several hundred thousand dollars that I would have bulldozed. That easy money was there for the getting and many profited. And then the bubble burst and as Paul Harvey would have said, "Now you know the rest of the story."

This is the iron law of unintended consequences. While the intent was good, the result was disaster.

Greed will always be with us like the poor. You can't outlaw greed because it is the human condition.