According to a self-confessed and convicted mortgage fraudster who now “…travels nationally to give presentations to groups of title agents, corporate executives, mortgage brokers, elected officials and other concerned groups,” the face of the real estate industry will change in the next decade, with most of those changes being brought about by class action litigation. (bio)

Ed Rybczynski was the owner and president of a Baltimore based title agency named Liberty Title. In November of 2003, Ed plead guilty to federal conspiracy charges (postal fraud) stemming from property flipping and mortgage fraud….Ed candidly shares the details of events leading to his conviction and the horrors of prison life to audiences who leave the presentations stunned upon realizing their degree of professional vulnerability. (ibid)

The fraudster turned consultant has a lot to say about the vulnerability of the nation’s mortgage  and titling  industry to fraud and corruption.  Among his talking points, Rybczynski notes that:

• Only by examining its causes do we surmise that mortgage fraud is properly characterized as a national epidemic, not a series of isolated incidents.  
• Only by scrutinizing the motives of mortgage fraudsters do we recognize the cultural corruption of an entire industry. 
• Mortgage fraud statistics correlate directly to foreclosure statistics which in turn point to a breakdown of professional protocol, and standards, in residential real estate markets.
• The disparities between mortgage fraud and predatory lending are academic at best.  Unethical, often criminal, behavior demonstrated by loan originators, appraisers, real estate agents, and title professionals is the real world nexus that definitively binds mortgage fraud to predatory lending. 
• Legislation and judicial interpretation are not the answers.  Heightened professional standards among real estate practitioners are the crux of the solution.
• Class action litigation will change the form and function of the real estate industry in the next decade. (Presentation talking points)

In his analysis of census data, using the number of total households in the United States, combined with the prediction of mortgage foreclosure, Rybczynski estimates that the number of people who will lose their homes due to mortgage foreclosure over the next few years will equal the combined populations of the Tampa and Denver metropolitan areas. (Ibid)

Simply put, we are looking at the possibility, no, probability of a financial catastrophe of almost biblical proportions.  Why? Because most estimates of the foreclosure catastrophe do not consider the domino effect of the home loss.

When that many people lose their homes, they no longer need the services of tens of thousands of plumbers, electricians, painters, law care personnel, or insurance agents. No more need for department stores, auto dealers, car salespeople.  The service industry will take a massive hit, if millions become homeless and can no longer afford cars, luxury items, and services.

The glut of foreclosed homes on the market will drive the price of real estate down, decrease the property tax revenues of cities, further depleting the cities’ abilities to maintain police and fire protection, schools, etc. In a worse case scenario, massive layoffs in the schools, police and fire departments, and service industries could generate another cascade of foreclosures, further adding to the catastrophe.  This is nothing less than the beginning of an economic meltdown.

By the time an angry public gets around to firing up the class action engine and going after the fraudsters and the people who dumped due diligence out of the window, it will be too late.  And, that is only the beginning of the mess.

This country was founded on property rights.  The trail of ownership of property is one of the cornerstones of American jurisprudence. A great deal of our government is devoted to recording property transactions, maintain the integrity of those actions in order to sanctify the sales process.

According to industry insiders from around the nation, the titling companies routinely ask for kickbacks.  The going rate for kickbacks is $300 per title according to several posts on real estate blogs.

One title company pro says the whole industry is sinking due to corruption, and that “Unless people with influence in the title industry do something to curtail this kind of hogwash, we are on a sinking ship. Title insurance as we know it is doomed.”(Ibid)

The multi-billion dollar title insurance industry, combined with a network of county recorders across the nation, is supposed to maintain the integrity of the nation’s property transactions.  But, many people across the nation say that not only has the network been compromised, but some of the transactions are so tainted that they are no longer valid as accurate renditions of who owns what, making it impossible to legally insure the title.

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