Real estate ‘getting worse’; a surge in fraud probes

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A couple of quickies: The view of real estate from Wall Street is considerably less cheerful than it was last summer, when ‘containment’ was everyone’s favorite word. From Bloomberg via Patrick.net: ‘JPMorgan Chase Chief Executive Officer Jamie Dimon said he expects U.S. home prices to drop as much as 9 percent this year as even borrowers with the best credit have difficulty keeping up their mortgage payments.’

More: ’ ‘Real estate is getting worse,’ Dimon said in a conference call today with investors after the bank, the third largest in the U.S., reported first-quarter earnings. ‘Home prices we still expect to go down.’ ‘

Also, from the Associated Press: ‘FBI Director Robert Mueller says there has been a ‘tremendous surge’ in mortgage fraud investigations, and he expects it to keep growing. At a Senate hearing Wednesday, Mueller estimated that the FBI has 1,300 investigations underway, 19 of them involving sub-prime lending practices by U.S. financial institutions.’

My two cents: I worked for a particularly results-oriented boss who was known for saying, ‘Don’t tell me about the labor, show me the baby.’ In this case I agree: Don’t tell me about the investigations, show me the indictments. To date, nationally and in California, we’ve seen only nickel-and-dime cases against small real estate firms. When the Justice Department truly has its eyes on a prize, it moves very quickly and, yes, ruthlessly. It sits important people down in rooms and tells them they have two choices: plead guilty and hope for a short prison sentence or be indicted and risk a long one. Time will tell if that kind of prosecutorial fury is in evidence here. There’s no sign of it at the moment.

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Photo Credit: Associated Press