2466: Debunking the Myth of Widespread Mortgage Fraud conspiracies with Michael Zuber

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Alrighty folks, I didn't want to do it, but I have to do it. We are going to once again talk about Melody Wrong. Uh, she is blowing up my, uh, X or Twitter feed. I have been copied on no less than 25 different posts talking about Melody Wrong and mortgage fraud. Jason, uh, I don't know if you know who Melody Wrong is, but she is a Substack author and constant doomer on YouTube. But I wanted to run through a scenario that Melody Wrong is pointing at— mortgage fraud, money laundering, ultimate criminal activity— and I want to know if you think it's real, if it's fake news, or whatnot.

Yeah, and she was on my show about, I want to say, maybe 3 years ago with predictions of doom that definitely did not come true.

Well, she's, she's, she has a track record that is unimpressive. -5% in 2024, did not happen. -9% in 2025, did not happen. And of course, the latest greatest, -38% in 2026, and we are sitting at all-time highs. So again, well, and she is not a forecaster, a doomer.

Right. And, and just so you know, we're talking about her housing price predictions, but remember, she was out with another article that we talked about previously, Michael, that said We would see a 50%, 5-0% reduction in housing prices in the United States. And we debunked that.

It was in the Newsweek article about that.

But the point is, is that, you know what she's been great at? She's been great at getting views and getting subscribers to her newsletter. And doom sells. That's the reality of it. You know, if you're going to come out with a bunch of negative predictions, People pay attention. Our minds look for negativity because that's what helped us survive over eons of history, but we just don't live in that world anymore. And, you know, our primitive brains can't sort this stuff very well.

Well, I want to talk about mortgage fraud because she is painting a very scary picture where all the greedy folks are doing, frankly, things that are illegal. And it's because of this mortgage fraud that the housing market is not performing well. So again, I'm going to summarize what I've seen all over X, folks. You can look it up on X if you want. But basically, she was on a channel recently that said the following. Jason, you go out and you buy a home for— make up a number— $500,000. You then, you know, put some lipstick on it, but then you go and you sell it to your friend for $1 million. And again, the house is only worth $500 grand, but because he's your friend, he agrees to pay $1 million. And then of course you have other homes around there where you go and do cash-out refis and use this one single sale To artificially inflate prices. You do a cash-out refi and bingo bango, you are suddenly like flush with cash. She is out talking about this as being prevalent. It's happening everywhere and it's fraud and it doesn't work that way. But again, she has PTSD, so every boogeyman is a boogeyman. How does the mortgage market actually work? How do appraisers actually work? And how are arm's-length transactions done to prevent stupid activity like this?

Yeah, well, what she's talking about, Michael, does happen to some very small degree. Okay, so let's examine this. First of all, appraisers need 3 comparables, and even if they had 3 comparables in one particular neighborhood, they're not generally completely stupid to where they're going to think, oh, why is this house in this neighborhood $1 million When every other house— yeah, yeah, just a, just a very short, you know, one neighborhood over, it's only $500,000 for a similar house. Okay, you know, the appraisers aren't that dumb. Remember, appraisal is a very localized business, so these appraisers work in local markets largely. I mean, they're— look, I want to just say there's exceptions to everything, including this. You know, no rule or law applies universally.

Well, I actually want to step back because you, you jump to the appraisers, which is, which is where this liability really lands and fraud really occurs. But actually, I want to go back a step earlier in the equation— the bank, the lender. What people don't realize, unlike the GFC— in the GFC, I, the borrower, could pick my appraiser.

Yeah, you can't anymore.

You can't do that anymore. I can't pick my appraiser. The lender picks the appraiser, and most lenders do randomized picks of appraisers.

Yeah, the lender doesn't even pick the appraiser because that allowed for a lot of the mortgage fraud that happened Previously, what they have to do now is use appraisal management companies. And these appraisal management companies are pretty large in most cases, and they basically pick an appraiser. Now, I've had many friends who are appraisers over many years, and they used to go into the offices of the mortgage lenders and bring them donuts and bagels and schmooze them and take them to sports— sporting events and things like that. Doing that now wouldn't help them because they can't direct that business the way they used to. So that has really cleaned up the industry quite a bit. What people have to understand is that leading up to the global financial crisis, or the Great Recession, whatever you want to call it, 2007, 2008, okay, leading up to that, nobody, nobody in the entire system of mortgage lending had any incentive to put on the brakes. There was no quality control person. There was no position for it. Everybody was being incentivized to do more deals, to do deals at higher value, to do more liberal deals where they could give a loan to anybody who could fog a mirror. We are in the complete opposite universe since then. Okay. Now, anybody who's applied for a mortgage in the past, you know, 15, 16, 17 years knows how difficult it is. These lenders are incredibly strict. They are underwriting mortgages very carefully, and they're just not giving them to anybody. So the quality control is dramatically better than it was back then, thankfully, and that's a good thing.

Yeah, it's a good thing. So again, there are so many checks and balances that would— again, could what Melody Wright putting out there happen? Sure. But to call it the great money laundering grift mortgage fraud That is, that is the sole reason for housing being unaffordable is just flat out wrong. It's another thing she says that's wrong. She has PTSD. She thinks everything is the GFC and everything is just like the GFC. She's never read Dodd-Frank. She doesn't understand that banks pick the appraisers, randomized appraisers are on this. Oh, by the way, you have to have 3 appraisers. And oh, by the way, if you are an appraiser and you are in our neighborhood, and in this example you see the million-dollar comp, but every other house is half a million, that million-dollar comp is ignored. It's an outlier. It's not even included. You couldn't include it if you wanted to. It's not part of the process.

Yeah.

And at that point, this whole thing blows up.

There's another big friction point that we haven't mentioned yet, and this is also good because what it does, it causes friction in real estate transactions in a good way. And that's the fact that real estate transactions are expensive. There's a lot of costs associated with transacting real estate. So for someone to do that grift that you mentioned at the beginning, that's an expensive grift, right? Because you have to have the closing process, and in doing that, you're going to spend some real dollars if you do it right. If you want it to show up, if you want the property to have title insurance, if you want to have a proper closing attorney, etc., etc. There is a process for that, and that process helps prevent that kind of, kind of self-dealing as we talked about. And also, it's fraud. If someone were to catch on to someone doing this, of course they would have civil liability, but probably criminal liability too.

Oh, it's criminal liability. So I just want to paint a picture. If what she says is actually happening, how many criminal parties have to be involved? So first off, the home seller, the home buyer, the bank, the appraiser— those 4 at a minimum all have to be in on the grift. All criminal.

Let's assume though that it's a cash deal. Okay, so take the bank and the appraiser out of it. There's 2.

Well, then that doesn't get her what she wants. She doesn't get the cash-out refi. That's her whole thing, is you're creating artificial value so you can go back to the bank and yank a bunch of cash out. So a loan has to be involved.

Right. Yeah.

So again, you have four parties to the fraud.

Mm-hmm. Yeah.

That is not happening.

Yeah.

These are not happening, folks. She is seeing the shadows in the night, and it's not there.

It's not happening. My my dog who's on the screen here loves to chase shadows, so it's exactly that.

Yeah. Exactly. So just so I'm not, I actually pulled it up on my feed of X. You can go look for this. The the channel that hosted her goes by TFB. TC, uh, if people wanted to watch it. It, quote, pretend to sell your home for $800K to your buddy for $1.7K. Take out a mortgage at the new price. Use the cash to buy another house. Repeat. Folks, you got to have 4 criminal people involved, not to mention beat a randomized test to make this happen.

That, that would be—

sure.

Yeah, the likelihood is those parties would be engaging in a, literally, a RICO conspiracy.

Correct.

RICO, R-I-C-O, that's the set of laws that basically took down the mafia. Okay. And made the mafia sort of a non-issue. Rudy Giuliani prosecuted the most famous case on that decades ago. I actually won a civil case on RICO a few years ago in 2022. A big giant case. I've talked about it on my show. So there's a lot of detail on that. It was against a competitor who engaged in a conspiracy. to basically steal my business. And, and we had a big federal court trial, 8 days, the jury, the whole thing, and we won. It was a big case. So I know all about RICO laws.

Yeah.

Having been through that. And that would sound like— I mean, I'm not an attorney, I don't, I don't know, but that sounds like it would be a RICO conspiracy. Now, why is that important? Because RICO carries automatic treble damages. So say, for example, that they found that those parties were liable for a RICO conspiracy just on a civil level, not criminal. Okay, criminal is another thing. They would be liable— if they found them liable for, you know, $5 million, it would be a $15 million automatic award.

Triple that.

And automatic attorney's fees, which attorney's fees, you know, a lot of cases are won or lost over just the attorney fees issue alone. And, you know, those attorney's fees to litigate a case like that probably be a million dollars. So they'd have a $16 million judgment against them, you know, and likely jail time at the end of the day. Well, that would be a criminal RICO. There might be a criminal referral too. You don't want to conspire with people to do stuff like this, folks. Also, you know, actually, actually, Michael, there'd be one other thing. They would possibly be engaging in price fixing.

Sure.

Okay, which is an antitrust violation. People go to prison for that. I mean, that's a major thing. Think about what they're doing there. They're trying to artificially inflate a price that the market would not pay. They're, they're basically, in a way, price fixing, I would argue. You know, I'm sure a prosecutor would argue that.

Yeah. And the last thing I'll say about this, given technology today, again, unlike the GFC, this one property transacted at a disproportionate number would stand out like a red thumb.

Well, they could do 3 of them though. They could transact 3 of those properties, but again, that's much more expensive and much more cumbersome to do. But yes.

Yeah, and again, you need so many parties because of all these hands-off transactions and randomized stuff that you would have to have at least 4 criminal conspirators to make this happen. And again, that's a very localized market. To, to talk about this being the thing that's causing nationwide housing prices—

oh yeah, that's just absurd.

stupid. It's stupid. It's not— there's not some underground fight club of people doing this fraud all over the country. It's just not happening.

Yeah, the first rule of Fight Club is don't talk about Fight Club. That's such a great movie. Do you know that movie is so good? I mean, you know, I've actually never seen it. It's only good— really? Oh my gosh, it's fantastic. I watch it, you know, every few years because there are so many deep, like, underlying meanings in it. And do you know that the person, the author of the book on which the movie was based, sold the movie rights for only $10,000.

Oh, wow.

And that was just an incredibly famous movie. It's a very good movie. Yeah, I'll have to look that up. I've never seen it. I didn't even want to watch it. I sort of saw it by accident because I was meeting a gal in Chicago and her plane was late and I was just walking down Michigan Avenue and I'm like, what should I do for a couple hours? I walked into a movie by myself and it was so good. I mean, I couldn't— it was the only movie starting at that time And, uh, this is the Brad Pitt and, uh, what, what's the other actor? Ed something or whatever, whatever his name is.

So Brad Pitt. Yeah.

Okay. But it's a whole movie about debt and the way they want to destroy the debt and consumerism. And, and then there's like a million other like deep layers and levels to it that, uh, really it's a very good movie.

Yeah. Well, again, folks, I wanted to talk about Melody Wrong. Once again, it's not my favorite thing to do. In fact, it annoys me to do this, but when my X feed blows up With people talking about Melody Wong and mortgage fraud and just other factually incorrect things. It's very disturbing. It's, it's crazy what you guys will fall for out there. And again, doom sells.

Yeah, we have monthly master classes that are totally free. Those are the second Wednesday of every month, empoweredinvestor.com/wednesday. And then we have a free software called Property Tracker as well. So take advantage of all of that stuff. It's all free.

Awesome.

Thanks, buddy.

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