Lou Minatti thinks Ben Bernake will fall off the tightrope he walks and send in the helicopters. I think the helicopters are already here in the form of M3 money supply. It is only a matter of time before we are using pesodollars to paper over the entitlement promises we cannot keep.
Wednesday, March 14, 2007
Entitlement Obfuscation
Lou Minatti thinks Ben Bernake will fall off the tightrope he walks and send in the helicopters. I think the helicopters are already here in the form of M3 money supply. It is only a matter of time before we are using pesodollars to paper over the entitlement promises we cannot keep.
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Snowflake's latest enrry. I printed it up and faxed it to the FBI and the Sacramento Da.
’ve been watching the Casey Serin entry in Wikipedia get written over the last couple of months. It’s obviously written by my critics but they say they are trying to keep an “encyclopedic tone” (see the discussion tab).
The problem I have is that the entry is highly skewed toward making me look bad. So much for following Wikipedia rules on biographies of living persons. Much of it is exaggerated and blown way out of proportion. Worse, it currently comes up as the #2 on google search for Casey Serin.
I feel the article is damaging my reputation because it’s very one-sided. I’m not trying to deny that I’ve made some mistakes or done some shady loans out of inexperience. However, an encyclopedia entry needs to be factual and un-biased.
Please help me by editing the article to make it more balanced and fair. That’s the beauty (and the built-in problem) of Wikipedia is that anybody can edit.
I myself don’t want to get involved because I don’t want to be accused of trying to spin my story. Instead, I’m going to leave my thoughts and additional details below and hopefully I can get can some positive support in editing my Wikipedia entry.
Here is my take…
Casey Serin (born September 10, 1982) is a failed real estate investor who, at the age of 24, became known as the “poster child for everything that went wrong in the real estate boom”. Serin was born in Uzbekistan and emigrated to America in the mid-1990s. In his early twenties, Serin was working as a php script programmer for Pride Industries. (a group that employs mentally disabled people), but he decided to quit this job with the hope of earning a living flipping houses. Beginning in October 2005 and continuing through the following year, Serin purchased eight houses in various U.S. states, and then began blogging about the process of facing foreclosure on several of the properties he was unable to sell before his money ran out.
Background
Although Serin was unemployed (with no ostensible income) when he bought the houses, he chose to declare on his loan applications that he was employed and earned a steady income…
I was employed at Pride Industries for over a year (Since Aug 2005) making $50,000/yr salary when I applied for the Calla Way, Sacramento house in October 2006. My income was just shy of doing a full-doc loan so we had to go stated-income. The income was stated a little higher then I was really making in order to qualify. I was told this was a common and allowable industry practice.
I bought the house slightly under value ($330K) with built-in $30K of equity which I chose to cash-out right at purchase by buying at full appraisal value of $360K with 100% financing. (My FICO score was only about 630, I think). I used the money to pay off our $30K of credit cards: about 15K was from Russ Whitney RE seminars and the rest was expenses from wedding in 2004 and miscellaneous consumer debt.
After some cleaning I immediately started marketing Calla Way myself (without an agent) in order to sell it at retail quickly and pay off my loan. I ended up selling the house on January 4th for full retail value (360K+costs) and simultaneously buying the buyer’s old house - Burdett Way, Sacramento. I didn’t want to lose the buyer and didn’t want to wait for their old house to sell so I put the transaction together to where we bought each other’s houses. This allowed me to secure the $30,000 as profit which up to that point was really part of the original loan.
The truth is I was a bit desperate to sell Calla Way because I didn’t want to start making payments on it and I knew the market was starting to reverse so I had to act quickly and make the deal work. I also got a little emotionally involved when I found out the buyer is a family trying to move to a better school district and safer neighborhood for the kids. I wanted to help them out and ended up paying too much for Burdett considering its condition and location. I figured trading down to a lower mortgage amount (295K) was still a smart move because it will be easier to service the payments.
By the way, I applied for Burdett property while still being employed at Pride Industries but had to use a stated income loan again. The stated income was within reasonable parameters for my job title (Programmer/Analyst) and it was justifiable at the time based on the advice I’ve been given by the real estate professionals working with me.
After that I tried to lease option the Burdett property while looking for more deals. Since paying off my credit cards my score went up to around 680. I was ready for more action.
In early January 2006 I took a 3 week leave of absence from my job at Pride Industries and flew with some investors to Albuquerque, New Mexico, which was a hot area for investing. There I put two houses under contract (Sonora Way and Guadalajara).
I came back to my job and found myself so busy managing all these deals that it was starting to affect my programming job performance in a big way. I didn’t feel it was fair to my employer to be doing my business on company time. So I ended up resigning from my job the same week and (end of January 2006) to pursue real estate investing/flipping full time.
I also had a side business doing freelance web design, web application development and hosting. I’ve have been doing the web business on and off for the last 10 years. I used the business to qualify for all of the loans going forward. Since it was hard to verify income from the business continued to use stated-income loans.
The only loan where I didn’t state my income was the Angleridge property in Dallas. There I got a loan from a hard money lender and they normally don’t even check credit because they only lend upto 65% LTV and thus are pretty secure with just the collateral.
… Serin has repeatedly admitted that he lied on his loan applications regarding his employment and his intention to reside in the purchased homes. To avoid lenders seeing that he had taken out multiple loans, he used several lenders for the various properties, and filled out the loan applications within a short time frame, so that the loans would not have sufficient time to appear during a credit check…
See my explanation of employment above. I did not lie about employment but I did state my income (within reason) to meet the debt-to-income ratio for each particular loan amount.
I did run each each loan as an “owner occupied property” or as a “second home” in order to qualify for 100% financing. I didn’t have any other properties at the time and I was buying all of them so fast that the credit report didn’t show all the other loans right away. This allowed me to justify the owner-occupied or second-home status. At the time this seemed OK to me and the professionals I was working with.
… In addition, he received cash back at closing on most of the properties — for his California properties, Serin received more than California’s legal maximum rate of 3 percent of the selling price.
Yes, I got cash back at closing through different methods. Sometimes disclosed on the closing statement, sometimes not. Either way I didn’t realize this was fraudulent behavior, I just thought the lenders didn’t like it. I definitely didn’t think I was committing any kind of a crime.
Cash-back at close is a pretty common technique among the real estate investors and associates that I collaborated with at the local investment clubs. I just thought it was a great way to finance repairs and payments for the fix-n-flip investment strategy.
The cash-back money was spent on both the mortgage payments for the houses, and on various luxuries such as a Hawaiian vacation for Serin and his wife.
Almost all of the cash-back went toward the repairs and servicing the 15-20K monthly burn-rate on 6 properties (at the peak) which includes mortgage payments, taxes, insurance, utilities, travel expenses, etc. Some of the money (about 15K, I think) went toward additional real estate seminars so I can get better and learn new techniques.
We also used the money for living expenses since this was our main business during 2006. The goal was to buy at wholesale, take some of the equity out at close, pay a few payments, fix up the properties and sell at retail and pickup an additional profit on the sale. Since I quit my programmer job I had to use some of the cash-back to live on while we wait for the houses to sell.
I never intended to commit any kind of fraud by taking the cash out and letting the property foreclose. My goal was to make a business out of it. I simply got overzealous and made some beginner mistakes. How many new business owners don’t make any mistakes?
And yes, I did take my wife for a surprise anniversary trip to Hawaii. We haven’t gone on a real vacation since we got married and I wanted to do something special for her. This was not a lavish or extravagant trip by any means. We even saved money by living with a friend for part of the week.
In a matter of months, the money largely ran out, and Serin is now 2.2 million dollars in debt, with a net worth of around negative $600,000. Interest in his blog at http://iamfacingforeclosure.com developed first among readers of blogs devoted to the United States housing bubble. His story was featured in USA Today, National Public Radio, and the San Francisco Chronicle, among other mainstream media. An online discussion of the fraudulent nature of overstating income in stated income loan applications uses the case of Serin as a running example.
Many readers of the blog initially encouraged Serin to contact an attorney in the hopes of discharging at least a portion of his debt by filing bankruptcy. Serin has largely ignored this relatively sound advice, in favor of essentially ignoring the problem and letting his debt burden grow daily.
I did consult a couple of different bankruptcy on several occasions. Filing bankruptcy is not a magic pill and has many consequences and issues that need to be considered. Every case is different depending on the desired outcome.
In my case I chose to avoid bankruptcy and attempt to pay back the debt by selling the houses and/or pay back most of it by doing a short sale and avoiding foreclosure on my credit score. If I was to declare bankruptcy it would have interfered with the short sale process and would have forced all the lenders to foreclose on me for sure. (With the exception of maybe one of the homes if I would choose to move into it.)
Chapter 7 bankruptcy doesn’t prevent foreclosure, it simply delays it 1-3 months. The secured lenders still have the right to liquidate the asset and will exercise that right in order to minimize loses. Even if my mortgage is discharged in bankruptcy the lenders still get to foreclose on the house - their collateral. Then I would have both a bankruptcy AND a foreclosure on my credit.
Chapter 13 bankruptcy (the repayment plan) wouldn’t have helped me much either because I didn’t have a stable income or a large enough income to try to negotiate a repayment plan on 6 houses. Chance are I would probably miss a payment and the houses go right back into foreclosure. I didn’t want to sight up for something I can’t commit. Even if I was to get a job there is no way I can earn enough per month to get on a repayment plan to catchup and float the amount of debt I have/had. Chapter 13 would also prevent me from doing a short sale on the properties and avoid foreclosure on my record.
Anybody who says “why don’t just declare bankruptcy” without considering all of the issues above obviously doesn’t know what their talking about. On the moral side, I felt declaring bankruptcy would have been equal to giving up the fight and walking away instead of trying to make it right.
Various readers of Serin’s blog have estimated that the interest on his debt is growing at the rate of approximately $600 per day. Serin has been referred to as the “pied piper of financial ruin”, and his plans for remedying his debt have many readers wondering if he is being overly optimistic, or if he is in denial over the gravity of his financial situation. In early 2007, Serin set his goals for returning to fiscal solvency — he plans on amassing an even greater debt burden by attempting to purchase an apartment complex.
Perhaps the apartment idea was a bit extreme. But what am I going to gain be being a pessimist?? Positive thinking is what kept me going all these months. Sure, some of my ideas get a little crazy but I didn’t want to just give up without a fight. “You miss 100% of the shots you don’t take” is the quote that comes to mind.
In addition, Serin has proposed to transfer his personal debts to a shell corporation purchased with the sole aim of hiding his debt, a course of action that numerous people have advised him is blatantly illegal. Serin initially conceded that there might be something “shady” about his proposal, although he has gone so far as talking to a corporate attorney about the plan.
See the problem with my haters critics is that most of them don’t understand enough about what I’m doing to give me competent advice. Everybody is quick to judge and since they have already made up their minds about me, everything I do is going to be “shady” to them.
Buying an existing corporation and applying for cash lines of credit with the help of a credit partner is a perfectly acceptable and legal business practice. I can even borrow from the corporation to refinance my person credit, as long as that’s not the only purpose of the corporation’s existence. My goal was to continue doing real estate and other types of investing with my corporation. So I may or may not use the cash lines of credit to refinance my debt. There are several issues to consider and I’m still in the process of seeking advice and figuring all that out.
Despite his repeated public admissions (both via the blog and on a webcam video) of lying on loan applications and committing felony mortgage fraud, Serin has not yet been arrested for these crimes — although IP logs of the visitors to his blog have shown that the blog has been accessed by the FBI, the IRS, the SEC, various state governments, and banks from which his fraudulent loans were obtained. Various readers of the blog, angry at Serin’s complete inaction, have attempted to alert the relevant authorities to Serin’s blog. In early 2007, Serin started up two further real estate websites: ablebuyer.com and buyingapartmentbuildings.com, though the second address now directs visitors to the first.
Criticism
Serin is regularly criticized on both his blog and other blogs specifically devoted to his story. A number of specific criticisms that have been leveled at Serin include:
* Disdain for standard university education in lieu of real estate guru seminars, for which Serin spent over $30,000, including training at Nouveau Riche University.
I have nothing against standard college education. Colleges teach you how to be a good employee. Nothing wrong with that because everybody needs to have a job for stability at some point in their lives. Going to college will make you more employable and you will make more money. But a job will not make you truly financially independent.
I decided to go straight for the business owner / entrepreneur / investor route and those skills are not typically acquired through college (though college can help with some aspects of it). I still have a desire to go to college someday but do it purely for personal growth and for the benefits of a well-rounded education. That would be after I become financially independent.
Even though I don’t regret the path I’ve taken I would recommend to all high school students to still go to college first, even if they want to be financially free. Just don’t get too brainwashed.
By the way, Nouveau Riche University was only about 16K for over 30 classes and 2 years of education (a bargain compared to seminar companies). It was a private loan with flexible repayment terms which include the ability repay the loan by working it off. NRU is much more than just some fly-by-night guru seminar. They are the only real estate investing educational company to receive college credit recommendation by the American Counsel of Education (ACE). They also have local communities of investors for support, a network of positive cash-flow properties and a bunch of other benefits. And no, this blog is not some cover-up to market NRU. Again, the critics and blowing things out of proportion.
* Not looking for full-time work, rather than living off his over-extended credit cards.
Why is full-time work considered the standard? I do work full-time on my own projects as a self-employed individual and do make some money there and here - technical consulting, online marketing, sales, helping other investors do deals, etc. Just because those are not traditional jobs doesn’t mean it’s wrong. Yes, what I’m doing right now is not super stable and I have/am considering a standard W2. We’ll see.
While I did continue to borrow some money AFTER facing foreclosure and starting this blog, it has been limited to trying to float my wife’ credit cards and also short term loans for business purposes. We haven’t been going into any more debt for living expenses much.
* Not declaring bankruptcy — however, a bankruptcy attorney told Serin that he may be prosecuted for fraud if he files for bankruptcy.
That is one consideration but there are a lot of other issues with bankruptcy. See my explanation above and my prior posts about bankruptcy.
* Living beyond his means — Serin’s bank statements posted to his blog showed expenses relating to dining out regularly, incurring repeated overdraft fees in the process.
How can you assume a pattern from one instance of an event? I don’t overdraft my checking account on a regular basis and I rarely go out to eat to nice places. But even if I do enjoy an occasional wheatgrass shot at Jamba Juice, soy latte at Starbucks, naturally-raised carnitas burrito at Chipotle, semi-healthy burger at In-n-Out or my new favorite whole-grain pasta with artichoke and grilled salmon at Macaroni Grill. Just because I’m facing foreclosure doesn’t mean I should stop living a normal life!
* Being evasive about how he spends each day, given that he doesn’t work.
I have a lot of projects that I’m working on and I don’t want to talk about it too much because the hat… er… critics are following my every move and are ready to dish out hate on everything I do. I have a right to privacy and just because I share a lot on my blog doesn’t mean I have to share every single thing I do.
* Attempting to use unethical and/or illegal methods (i.e., shell corporation) to get out of debt.
I already addressed this and if done right, there is nothing wrong with my corporate strategy.
* Serin’s determination to continue as a real estate investor despite his current abject failure in that field.
Failure is part of success. Show me one successful person that has not failed a bunch of times (big or small). Failure is how we learn. Failure is good. The goal, of course, is to minimize failure by learning from it and not repeating the same mistake. I’m still learning that part.
Determination to succeed is the key ingredient of those who succeed. But I don’t need to explain this. It’s common sense. Those of you who are telling me I’m a failure because I happen to make a mistake are a bunch of babies. Grow up!!
Completely ignoring his current bills, and looking for more credit lines with subprime lenders like CashCall.
This is inaccurate. I am paying my personal bills and rent. I am NOT paying credit cards and mortgages because I can’t handle the debt load at this point. And NO, I am not getting any more personal credit from CashCall or any other company. Some people love to spread false rumors.
* Serin’s refusal to live in any of the houses he purchased, possibly delaying the foreclosure process.
How is me living in the houses going to delay the foreclosure process? I’m not living in the houses because I’m trying to sell them and marketing a vacant house makes it sell much faster. Plus, many of the houses are not move-in ready. The bills and maintenance is higher in a house rather then renting a room like we’re doing now. And its a waste of time and money moving around only to have to move again in a couple of months because I lost the house to foreclosure.
Serin’s personal eccentricities: his habitually unkempt haircut, his carrying a purse, and his obsession with juicing.
Why are you attacking my style and health choices? It’s not a purse. It’s a MAN bag. Big difference.
Inability to reconcile his purported Christian faith with his actions, particularly his mooching off his family and in-laws.
I’m not mooching off anybody. I’m paying rent for the rooms and my family willingly helps me with food from time to time. I’m in a time of distress and am blessed to have such great family support.
In addition, more than one website has arisen whose main focus is following Serin’s postings and actions in a critical manner. Serin has referred to these sites as “hater sites”.
That’s right. Haters!
Personal Life
Casey Konstantin Serin is married to […]. His wife does not participate in the blog or other publicity, although publicly-available documents filed with various county offices indicate that she participated in some of the financial deals. In addition, Serin has photographically documented his wife playing a part in some of the alleged rehabilitation of the properties. They currently live with Serin’s sister-in-law in West Sacramento, California.
It’s very obvious that my wife doesn’t want to be mentioned online. Why are some people so determined to violate her privacy by posting her name everywhere? I took down pictures of her shortly after I started the blog per her request. The haters have saved cached versions of the pictures and spread them all over the internet. That’s just not right.
The public record has her name because in order to hold California property in just my name as a married man I must have my wife deed her interest in the property to me upon purchase. It’s a standard procedure and if you know nothing about real estate don’t spread false rumors.
She was involved with my business to a degree. She went with me to some of the seminars and helped me do some of the account and administrative work. She also tried supervising contractors one time but that didn’t work out very well. She was not on any of the loans except for the one in Dallas where the lender insisted to have both of us on there. Aside from that this whole real estate thing has been pretty much my baby.
Themes and Catch Phrases
Serin is very fond of using catchphrases and buzzwords on his blog, perhaps as a by-product of his preference for get-rich-quick gurus over conventional education. He frequently talks about finding “sweet deals”, “repaying every dirty penny”, and “falling forward”. These phrases are often mentioned sarcastically in his blog’s comments, generally mocking Serin’s exuberant optimism. Serin also likes to end postings with a cheerful “It’s all good!”, even at the end of a post that otherwise describes a situation of utter financial ruin.
There are also numerous references to Jamba Juice and Macaroni Grill on his blog, which stem from a post on November 21, 2006, in which Serin reproduced, but later withdrew, a photo of a recent bank statement. His blog’s readers immediately spotted that despite his dire financial predicament, he was still a regular customer at these establishments. With almost no money in his checking account, Serin had incurred numerous overdraft charges, and had essentially been paying upwards of $38 for a drink that normally cost less than $5. Since then, the names of these two restaurants are repeatedly cited in attached comments — usually with the intention of symbolizing examples of luxuries that Serin cannot realistically afford, but to which he nonetheless feels entitled.
I’ve already explained the Macaroni grill and Jamba Juice. As far as “catch phrases”, those are part of my regular speech. I write this blog in a conversational style. I’m not trolling, just being real.
…
As you can see my Wikipedia entry is filled with highly biased opinions, inacruate information, and assumptions. This is hurting my reputation and I consider it libelous. I love Wikipedia but we need to do our part to keep it fair and balanced. Don’t just read, jump in and edit.
OH,I love the part where he "considers this libelous".
Too funny. Bring on the lawsuits snowflake. Dicsovery will be fun for you, Galina, your family, Chris, Duane, Nigel, Ramit, and your former employers including Res-Com.
That pic of the Apache gave me a BONER.
The USD is toast. Stick a fork in it.
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