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March 22, 2007
I just got finished listening to the massive two hour long webcast by Casey Serin. For those unfamiliar, Casey bought almost a dozen homes with no money down during the housing bubble and has since had most of his purchases foreclosed upon. His purchases were often ones involving cashback at closing, often tens of thousands of dollars. During his webcast he was relentlessly criticized and attacked for stupidity and recklessness.
His blog, iamfacingforclosure.com, has sprung to popularity inciting rage in many of his visitors. I have been a long time reader of his blog and find his site hilarious as well as compelling. Here is a man who used his credit score to secure nearly two million dollars worth of loans with barely a dime of his own. And lost it all.
That seems to be what causes most people to spit and scream. Some have argued that people react angrily to Casey because of Zero Sum, the feeling that Casey’s loss has somehow affected others negatively.
Honestly, I believe Casey is hated because of jealousy. Allow me to explain. Many of us live our lives owning only one home, and saving extensively in order to afford a down payment. These homes hold mortgages so high that their owners spend the next thirty years working full time in order to afford the monthly payments. Children come along and eventually, after half a dozen refinances to help pay for the children’s college educations, the homes are paid off.
By this time, many find themselves with a pitiful to modest savings, and often reliant on Social Security in order to survive. This is the existence of our grandparents and parents. Little changes as the generations pass.
Casey is unique. He arrived in America after emigrating from the former Soviet Union. He came to America and did something most of us could never fathom, dream of, or dare attempt. He took a risk.
0% down loans allow anyone with a decent credit score to buy a home with NO money. If one overpays, it is possible to get cash back and cover a year or two of mortgage payments as well until one flips it. This is a fact of life. Banks offer this service voluntarily. Say what you will about their decision to do so, they have made it and it’s their responsibility.
Casey was able to borrow all of these funds without having to provide proof of any income whatsoever. Again, the banks voluntarily allow and offer this service. Say what you will about their decision to do so, they have made it and it’s their responsibility.
Something which I don’t believe anyone has seriously discussed yet is how brilliant these crazy purchases of Casey’s were. Allow me to explain. The United States does not have a debtor’s prison. With the exception of Student Loan debt, most debts can be erased through bankruptcy. Foreclosure on a defaulted home generally takes at least six months to execute, and generally does not force an individual into bankruptcy. Generally, the worst the banks foreclosing can do is destroy your credit score for up to seven years.
What am I trying say? Casey’s decision to take out two million in loans was akin to putting two million dollars worth of chips on black on a roulette table. The bonus? The money was given freely to him by the banks. Had the market not slowed, and the bubble popped, Casey would have stood to profit close to one million dollars. Think about that.
Casey could have become a millionaire with no investment of his own. Even as the market tanked, he was afforded an amazing amount of time before the banks foreclosed. He was able to control property for almost a year without even having to make payments. Had the market rebounded, he still would have made tens of thousands. Think about it.
Even as the homes were foreclosed upon he was able to make a few thousand selling his redemption options and wrapping one of his homes. He still made money from homes which he bought with the bank’s money.
What I’m driving at is, Casey could have become a millionaire, something which most of us will never do. He failed, but his failure has been relatively painless considering the rewards he could have reaped.
Casey took a chance that we should all consider seriously. Few people realize how risk free one can invest in Real Estate. For example, in California the civil code of procedure section 580 allows people to buy a home with 0-risk. They are only liable for what they put down, all your other assets cannot be touched. I could move to California, and have my wife buy a $600,000 home with no money down in her name only. If it went up a modest 20% or so in value we could sell if and easily reap $100,000 after closing costs. This is a small fortune to most Americans. If the home went down in value, my wife could turn in the keys and walk away with a small hit to her credit. That’s it. That’s all that could happen if things went bad. This is close to arbitrage , and if nothing else is highly intelligent arbitrage betting. Now imagine if my wife got two or three such homes with no money down. We could potentially net hundreds of thousands with next to no negative repercussions other than a trashed credit which WILL eventually clear itself. Is seven years of bad credit better than thirty years slavery to a mortgage? Is it more intelligent to spend thirty years working to pay off a home, or ‘Casey Serin’ it every seven years until you make a million?
What is beautiful about such a strategy is that if one is married, the assets belonging to one’s significant other CANNOT be touched. My wife could steadily buy homes In California ever seven years, while I kept all our other finances in my name. If things fail, no harm done. If things succeed, we’re rich!
I guess that’s the solution for Casey’s problem. His wife. He needs to focus on getting her credit cleared up so that she can take care of their immediate needs, while Casey takes a seven year break from home loans. He’ll still be young when his foreclosures drop off his credit report, and then he’ll be able to buy another ten homes. The rest of us can all complain, but that’s how the system is set up, and at this rate, Casey will be a millionaire before most of us even pay off half of our 30 year mortgages.
read comments (13)
March 23rd, 2007 at 5:01 am
Interesting concept. Prepare for the hate ;->
March 23rd, 2007 at 5:33 am
The truth is Casey is a criminal. I’ve been investigation mortgage fraud over the past 2 years and am currently looking at several people involved in over 70 homes. And that’s just what I can prove at this time.
You (or Casey) cannot convince me that he didn’t know he was stealing. He would have continued to do so for years had he not been caught. What I mean by caught is that he was not expierenced enough to hide his crimes long enough to get out from under the houses he stole.
The purchases were the result of lies. I blame the lenders too. Stated income loan. Please that’s just asking for trouble. And that’s just what they got. The lenders don’t care as long as the mortgage is serviced. It’s still fraud.
If you dig deep enough there are title companies getting kickbacks and third parties are getting cash too. Who suffers. the communities in which these homes go into foreclosure. Property values go down. Property taxes go down and with that people who work in that community suffer because they are paid by tax dollars. The residents suufer beccause they don’t get fair value for their homes in the area of the foreclosed.
Yes you can argue it’s one house in a community and it’s no big deal. The big deal is if you let people like Casey continue on their merry way they buy (steal) more homes in a particular community and rent them out as HUD homes and they eventually let the homes go into disrepair and eventually foreclosure. Then they disappear.
Do I hate Casey. No, I don’t know him enough to hate him. Do I want to see him go to jail for the crimes he commited. YES. Why? The fact that he knew he was committing a crime. You can’t let people who know they are committing crimes get away with them. Especially when they admit the crimes in public.
Call me harsh, but if dealt with the lot of thiefs I’ve been dealing with for the last 2 years you’d change your tune.
March 23rd, 2007 at 8:28 pm
Fascinating commentary. Remember the guy who brought down the Amaranth hedge fund last year with billions in losses? He’s gotten back on his feet: http://www.usatoday.com/money/markets/2007-03-23-amaranth_N.htm I think Casey will do the same.
You’re right about Casey. He took a risk to try to live life fuller and gunned a system which allowed him to do it. His plan would have worked brilliantly - the flaw being no hedge against a decline in the real estate market.
As to the issue of criminality.. .technically under the letter of the he could be in trouble. But look at the culture and what’s been going on for the last decade.
No one had to answer for the performance of loans. The rising housing market disguised the loose guidelines (potential defaults were prevented by refinancings) and everyone made their golden crumbs at the vansihing loaf was bured deep in the bread box. After banking deregulation in 1999 the lenders would buy securities firms and the securities firms would buy lenders, all of them buying time and each other before the cat got out of the bag.
It was all good until interest rates went up. It will be interesting to see if Casey has to answer in a bigger way for embellishing on his loan apps, but what he did was part of a system of rampant “control fraud”. Prosecuting him would be tough and embarassing.
March 23rd, 2007 at 9:06 pm
I find it amusing when people yell out that he should go to jail. Why?
Often the only intelligent reason given is that he allegedly ‘lied’. If you follow Casey’s site, he clearly implicates BOTH the lenders AND the mortgage brokers in not only assisting him in this, but also ENCOURAGING HIM.
The system is flawed. He was able to exploit it. Hate the game, not the player.
March 24th, 2007 at 12:20 am
He should go to jail because he is a crook. That doesn’t excuse the lenders or the mortgage brokers, they are probably crooks too. But he admits on this own web page that he lied on the applications and that the deals were “shady.” If the lenders and the mortgage brokers encouraged him, that just makes them co-conspirators; it doesn’t excuse him. Certainly not morally and probably not legally.
The behavior of the lending industry in this country is disgusting, and none of them deserve any sympathy for the losses he caused them; but that doesn’t make what he did right. People doing what he did contributed to higher housing prices for everyone trying to buy legitimately. You decry the mortgage industry for its scummy ways, but, at the same time, you seem to be saying its ok to do immoral things as long as you can avoid legal repercussions.
March 24th, 2007 at 3:23 am
[…] from some of yesterday’s discussion regarding whether or not Casey Serin is criminally liable for his actions, I thought I should share […]
March 24th, 2007 at 3:25 am
LoL. So, this is the “7 Year Financial Plan.” Take risks with the bank’s money, then let your spouse take a seven year turn if you screw up.
But, think of the injustice!!!
How can singles and gays have equal ability to screw the system?
March 26th, 2007 at 5:23 am
I agree Liz. That’s why he should go to jail along with those who helped him. You didn’t do it on his own.
March 26th, 2007 at 5:28 am
to admin,
He admitted he lied. The broker,loan officer and everyone else involved should be charged. It’s a RICO conspiracy. Hate the game not the player? It’s no different than someone breking into your home and taking your stuff. It’s not that they want your stuff to keep, it’s to take to sell for something else. With your attitude you’re saying it’s okay to steal.
March 29th, 2007 at 11:05 pm
Walt - But who is the crime against? Who is he stealing from? Your analogy makes no sense. It’s more like opening all your doors and soliciting passerbys…”Hey, commere’…take some of my stuff. Seriously, I want people to have it. Come on in and have my stuff.”
The morgage company is inviting him to lie. They are a part of the game, so he’s not stealing from them. He’s not going to get charged because the mortgage companies don’t want to charge him. It would be a disaster for them. They want to keep allowing people to state whatever income they want so that the mortagage company can make more money. They know people are lying and are ok with it because that is how they get cash. They charge an inflated interest rate for stated income buyers to make up for the extra risk.
Ask yourself: why don’t stated income buyers pay the same rate as people who can prove their income? Answer: Because the mortgage companies know that the stated income is often a lie. If they were REALLY making that much, the risk would be less and it would only make sense for them to pay the same interest rate as someone who proves their income through a traditional loan.
April 2nd, 2007 at 6:03 am
If I invite you to buy 2 kilos of coke for $40.00 and you buy it then resell it at 1000 times the price and then you give me a cut of the cash we have both comitted a crime. It’s not the mortgage company. It’s a few people in the company that are getting kickbacks from commisions. Yes you are right they are wrong for doing it. But just because you can do something does not mean it is not a crime. Look we won’t agree on this topic. Believe me if I could charge the mortgage companies with a crime I would.
I will be charging one individual who knew the loans were fraud and knew the people involved were not licnesed to do anything.
April 22nd, 2007 at 4:06 am
Having been in the (mortgage) asset recovery business for over 20 years (in Executive Management now), I am compelled to comment on the ‘Casey go to jail’ sentiment. Simple fact of the matter is no matter how one slices it; the lenders involved knew what young Serin was doing… Underwriting personnel are not stupid, folks, they know the “liar loan” game (and on occasion play it themselves)!
Foremost there are systems in place to verify certain information given by a borrower, and compliance with those were clearly evaded in the case of Serin. Moreover, lending guidelines make such loans possible; all in the name of increasing portfolio pools and consequent profits. No doubt in my mind lenders concerned in the Serin saga, are not entirely blameless.
Anyone whom believes that a 23 year old kid can acquire 2+ million in credit, through lying about income and such; either doesn’t know how mortgage operations REALLY work, or has an ax to grind against this kid for other reasons. Yeah he could (possibly, maybe, might) get prosecuted (uncertain given the time frames); albeit prosecution and conviction are two different aspects… Check out the clean hands doctrine, detractors? It applies in criminal cases too.
Casey Serin may be gullible, foolish, a little arrogant, and possibly down right lazy yet the kid hasn’t done anything hundreds (if not thousands) of other borrowers have (albeit on a singular basis) — lied to get a mortgage approval they otherwise would have been denied.
And I, frankly speaking, look with more distain upon those whom cast stones at Mr. Serin for doing what they’ve either done themselves or wish they had the guts to.
May 19th, 2007 at 4:54 pm
Bank robbery is just an agressive borrowing practice.
I suggest LossMitPro present his assertions on Calculated Risk so they can confirm his opinions. Or not. But that would take guts.