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BFCSA investigates fraud involving lenders, spruikers and financial planners worldwide.  Full Doc, Low Doc, No Doc loans, Lines of Credit and Buffer loans appear to be normal profit making financial products, however, these loans are set to implode within seven years.  For the past two decades, Ms Brailey, President of BFCSA (Inc), has been a tireless campaigner, championing the cause of older and low income people around the Globe who have fallen victim to banking and finance scams.  She has found that people of all ages are being targeted by Bankers offering faulty lending products. BFCSA warn that anyone who has signed up for one of these financial products, is in grave danger of losing their home.

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BFCSA: What’ll Suffocate these Housing Bubbles: US Government Mucks up Money-Laundering in Real Estate

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No need to be a rocket scientist to know why phase 2 of the AML act was never introduced.....looks as if not just in Australia either!

What’ll Suffocate these Housing Bubbles: US Government Mucks up Money-Laundering in Real Estate

by Wolf Richter • July 27, 2016

http://wolfstreet.com/2016/07/27/us-government-money-laundering-real-estate-housing-bubbles-ny-miami-san-francisco-silicon-valley-los-angeles/

 

Manhattan and Miami already get mauled. Now expanding to San Francisco, Silicon Valley, Southern California, even Texas!

Cash sales of homes – mostly the domain of foreign and affluent buyers – fell to 32% of total home sales in April, down 2.8 percentage points from a year ago, according to a new report from CoreLogic. For the first four months, cash sales dropped to 34%, the lowest since 2008.

In Florida, the number one destination for foreign homebuyers, cash sales accounted for 46% of sales, and in New York, for 44%, both decreasing as well. The “strong dollar” and “global uncertainty” were blamed.

In Manhattan and Miami, the luxury condo markets are already getting mauled. For example, we reported that in Manhattan, condo prices plunged 14% in just three months.

We also reported that foreign investors were pulling back, particularly Chinese investors, the most prolific of all foreign buyers. The number of homes they purchased over the 12-month period had plunged 15%.  So is it just the “strong dollar” and “global uncertainty?” Or could there be more to the story?

Today, the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) announced that it would expand a program it had kicked off in January to identify and track secret homebuyers who hide behind shell companies.

The expanded program will “temporarily require US title insurance companies to identify the natural persons behind shell companies used to pay ‘all cash’ for high-end residential real estate in six major metropolitan areas,” up from the two areas designated in January, Manhattan and Miami, among the biggest destinations of global wealth:

FinCEN remains concerned that all-cash purchases (i.e., those without bank financing) may be conducted by individuals attempting to hide their assets and identity by purchasing residential properties through limited liability companies or other opaque structures.

Real estate purchases in the US have been a perfectly good way to launder large amounts of money, no questions asked. Brokers and banks and other industry professionals have played along. Everyone in the world knew it. And they came to launder their cash.

These folks don’t mind paying a little extra. So as an industry-pleasing side effect of this influx of opaque money, luxury home prices soared, from where they trickled down to the rest of the market.  The New York Times, whose investigative reporting on money laundering in the real estate business, particularly in Manhattan, appears to have stirred the Treasury Department into action, explained in January:

It is the first time the federal government has required real estate companies to disclose names behind cash transactions, and it is likely to send shudders through the real estate industry, which has benefited enormously in recent years from a building boom increasingly dependent on wealthy, secretive buyers.

Apparently, this first experiment in Manhattan and Miami was successful for the government, according to the release today:

The initial GTOs [Geographic Targeting Orders] are helping law enforcement identify possible illicit activity and informing future regulatory approaches. In particular, a significant portion of covered transactions have indicated possible criminal activity associated with the individuals reported to be the beneficial owners behind shell company purchasers.  This corroborates FinCEN’s concerns that the transactions covered by the GTOs (i.e., all-cash luxury purchases of residential property by a legal entity) are highly vulnerable to abuse for money laundering.

So with these successes under its belt, FinCEN outed its expanded list and the minimum purchase prices for each area that would trigger the reporting requirement:

New York: Manhattan with a threshold at $3 million; Brooklyn, Queens, Bronx, and Staten Island at $1.5 million.

Florida: Miami-Dade County, Broward County, and Palm Beach County, all at $1 million.

California: San Diego County and Los Angeles County; plus in the Bay Area, San Francisco, San Mateo County, and Santa Clara County, all at $2 million.

Texas: Bexar County (San Antonio area) with a threshold of $500,000.

Through this expansion, “we will learn even more about the money laundering risks in the national real estate markets, helping us determine our future regulatory course,” the release said.

It’ll send more shock waves through the global community of secretive cash buyers of US luxury real estate.  Already, after the reporting experiment kicked off in January, these secretive foreign buyers stepped back in Manhattan and Miami. Builders didn’t expect this to happen, and banks didn’t either. They all loved these large quantities of opaque cash, and they developed the luxury towers in Manhattan and Miami to accommodate these folks. Those towers that are already far enough along will keep going up. The opaque foreign cash is likely to dry up.

Now some of the toniest areas have been added to the list, including a big part of Southern California, San Francisco, and a big part of Silicon Valley, a favorite target for foreign investors, particularly from Asia.  Like in Manhattan and Miami, these areas have experienced a phenomenal building boom. In the Bay Area, and particularly in San Francisco, high-end condo towers are sprouting like mushrooms, some of them marketed directly to investors in China.

 

This tsunami of new units that’ll continue for years comes at the worst possible time, now made even worse by the jitters of foreign investors that everyone had counted on. Those who want to remain hidden behind shell companies are likely to stay away. And this could be the next big shoe to drop on these overpriced trophy housing markets.  It’s not like San Francisco’s crazy housing market doesn’t already have enough problems. Read…  These 2 Forces Will Crush the San Francisco Housing Bubble    http://wolfstreet.com/2016/07/05/san-francisco-jobs-labor-force-decline-crush-housing-bubble/

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