GMAC was formerly the finance arm of carmaker General Motors

Losses at finance group GMAC have risen by more than a half after bad debts increased at its mortgage business.

The company reported a loss of $3.9bn (£2.3bn) between April and June, up 56% on the $2.5bn loss it made a year ago.

The loss included a $1.2bn charge related to the firm’s conversion from a partnership into a public company.

GMAC has received billions of dollars of government aid to combat mortgage losses and to provide funds for Americans to buy cars.

In December last year, the government stepped in with a $6bn bail-out.

In May this year, the US Treasury announced that it would provide a further $7.5bn in aid.

“The company lives and dies by its federal government support,” said Sean Egan at Egan-Jones Ratings.

Excluding one-off charges, GMAC said its quarterly loss was $400m.

In the first quarter of this year, the company made a loss of $675m.

It had returned to profit in the fourth quarter of 2008 after more than a year of losses. However, those results were largely thanks to a one-off gain from a debt swap which reduced its interest payments.

GMAC was formerly the finance arm of carmaker General Motors. However, in 2006 it became an independent finance company after GM sold a 51% stake in the business.

In May of this year, GM further reduced its stake in the company.

Moishe Alexander has been watching this situation closely and will be reveiwing it from time to time.

Here are some tips for recognizing and preventing mortgage fraud:

For sellers

* Get references for real estate and mortgage professionals — and check them. Make sure they’re licensed with the state, county or city.
* Be cautious about selling your property, especially if it’s not currently on the market.
* Read and understand everything you’re asked to sign, and talk to an attorney if you need something explained.
* Don’t sign any documents with information left blank.
* Do not agree to an amount above your asking price, especially if you are asked to refund the difference after the closing or if the extra money is to be used for repairs or improvements that you know are unnecessary.
* Be wary of offers to “save” you from foreclosure. You may pay thousands of dollars in fees without reducing or eliminating your debt and could even end up losing your home. Work with your lender instead, and insist on getting a complete set of the closing documents.

For buyers

* Be extremely wary of “no money down/cash back at closing” investment opportunities.
* Do your homework. Check the sales history of the property — several sales within a short period of time could indicate inflated values — and have your own real estate agent or appraiser establish the value.
* Check with your local tax assessment office or recorder of deeds to make sure the seller really owns the property.
* Do not let someone else use your name or Social Security number to buy a property, especially if they offer to pay you for using it.
* Read and understand everything you are asked to sign, and talk to an attorney you have chosen if you need something explained.
* Do not sign any documents with information left blank or that contain inaccurate information, such as overstated income, source of your down payment, incorrect sales price, nature or length of your employment, intent to occupy the property as your primary residence, etc.
* Deal directly with the lender or the mortgage broker. Do not let a third party arrange your loan.
* Insist on getting a complete set of the closing documents.

“Although there are certain transactions or documentation which raise suspicion and probability of membership by Scott Park in the conspiracy, there is insufficient evidence to establish his membership in the conspiracy beyond a reasonable doubt,” Ouellette wrote in her lengthy judgment. “There is no doubt whatsoever that the real estate practice carried on by Scott Park left much to be desired, but that is not the issue before this court.”

The case is believed to be the largest mortgage fraud in Alberta history.

Last year, Gohar Pervez pleaded guilty to 54 counts of fraud that netted him more than $1.8 million in profits in less than half a decade. The scam, which took place from 2001-05, involved more than 19 lending institutions, over 100 properties and almost 300 real-estate transactions.

Four others have also been sentenced in connection with the scam scheme.

Pedro Brito, 33, pleaded guilty to 10 counts of fraud and was sentenced to one year in jail. Harkamaljit Kahlon, 30, was sentenced to three years in prison after he pleaded guilty to 12 counts of fraud. Rodrigo Caroca, 33, pleaded guilty to five counts of fraud and was sentenced to 90 days in jail.

In January, paralegal Terry Ellis, 61, was sentenced to more than five years in prison after she was convicted of 12 counts of fraud and one count of forgery. She is believed to be the first Canadian convicted of committing an economic fraud on behalf of a criminal organization.

The typical fraud would begin when Pervez bought a ramshackle house. He would then find a straw buyer to purchase the home for much more than he had paid. The straw buyers rarely saw the homes they bought and were only paid for the use of their names to acquire the mortgages.

While the straw buyer’s name was on the title, Pervez would manage the house, often renting it out and using the proceeds to pay the mortgage. He would fix up the properties and force appraisers to over-value the homes. After the bank forwarded the mortgage money, Pervez or one of his associates would assume the mortgage and eventually sell the property to a third person.

Jim Cramer should continue his rantings until everyone who hears him understands this mortgage market meltdown is here to stay. Interest rates could drop to zero today and that would have zero effect on the real estate economy as a whole. We still have the same issues: buyers who can’t qualify – home prices that have not softened enough to entice them back and greedy sellers holding out hope that their home will escape foreclosure and be spared the wrath of the mortgage market meltdown.

“Flipping” real estate isn’t a new thing as I remember seeing it back in the early 80’s. What’s new about it is that because of artificially inflated real estate values, everyone jumped in raping and pillaging causing the beginning of the mortgage market meltdown.

In this short video, I show you how “flipping” occurs and how you can protect yourself from accidentally being involved. I’ve seen it happen right before my eyes and covertly documented it. Upon presenting it to the FBI, their response was that unless I could show them “widespread” abuses of a minimum of $1 million dollars, they’re not interested.

Duh! They broadcasted that ignorant statement telling everyone how to get away with it! So, our government in their infinite wisdom has also contributed to the mortgage market meltdown. Just ask Jim Cramer.

You’re going to buy a house. Someone you know is going to buy a house. It’s the American Dream. The only question is; are you going to get screwed doing it?

Acknowledgments to Jim Cramer.

What is a bridge loan again?

A bridge loan is a short-term financing, usually 12 to 36 months, that allow you to buy an asset now, pay back the bridge loan with the sale of another asset and then get a traditional mortgage on the new property you acquired. Bridge loans are easier to qualify for, faster to get approval for and often can be converted to a longer-term mortgage by the same lender.

Higher interest rate and double fee

One of the drawbacks a of bridge loan is the interest rate.  It is usually at 2 percent above standard mortgage rates. All lending is based on the risk assumed by the lender. In most cases, the borrower’s financial condition won’t meet the requirements for a traditional mortgage until a home is sold. Lenders have more flexibility in which to make a judgement call when offering a bridge loan than with a 30-year mortgage, but because the risk is higher, the interest rate will be higher. In addition to paying higher interest rates, bridge loans have many of the same fees a long-term mortgage does, some of which you will have to pay again when you pay off the bridge loan and convert to a traditional mortgage. Additionally, for the period you have the bridge loan, you will be paying monthly on that loan and your current home loan.

Home equity may be at risk

Most bridge loans will not cover 100 percent of the new home to be purchased, 80 percent is the mortgage industry standard.  The borrower often uses equity in a current home as collateral for the loan. If the first home does not sell, and you cannot pay off the bridge loan for the new home, you could face foreclosure on the loan on your existing home. It is important to gauge the likelihood of selling your home.

Additional work for you

Bridge loans are a far smaller piece of the lending industry than mortgage loans. You can compare mortgage loans online easily and narrow your options. But bridge loans are unique to every borrower and lender. You will have to put in the time to talk to a trusted lender.