For several years now, we’ve been witness to what was once the American dream turn into a nightmare for millions across the country. Captivated by the idea of owning a home, many accepted lending terms from banks that seemed too good to be true. And indeed it was, as we discovered once the bubble burst: Over the last four years or so we’ve seen millions of homeowners having their property seized by lenders and billions in real-estate assets being written off as losses by the same banks that offered the subprime mortgages.
I began writing about the housing bubble, the complexity of the subprime mortgages and the effect it would have on consumers, the banking industry, and the insurance industry in the Daily NewsFlash in the summer of 2007. We concentrated on AIG’s woes, job losses, the drop in home values, and the losses that would bring the financial system to the brink of collapse in the fall of 2008.
What I didn’t know, which I just discovered in reading the recently released book, GOOD COPY, BAD MONEY by Glen Morisano and John Lansing, was how the drug cartels were also involved in disseminating the American dream. In this riveting true story about Glen, a former Deputy Inspector and commanding officer of the New York Drug Enforcement Task Force, in addition to getting an insider’s view of drugs and corruption, I learned how the cartels scammed the Federal government to buy up houses in Florida and Las Vegas, made tons of money, and then walked away.
Here’s how it worked as explained in GOOD COP, BAD MONEY: The cartels recruited aliens with good credit to qualify for loans under the Foreign National Loan Program. As long as you had a name, passport, visa, Social Security, good credit, and could put 10% down, you could buy a home. Banks like Washington Mutual, Bank United, World Savings, Greenpoint Mortgage Bank, and others serviced the loans. The houses were bought with dirty drug money by the cartels in the recruits’ names. They bought houses all over Florida and Las Vegas, and even sent their own people to real estate school so they could work in the banks to get the bogus mortgages through!
With a 10% down payment, these cartels bought up homes supposedly worth $400,000. They then would get an appraiser and pay him/her off to up the value of the house and apply for a second mortgage on the higher appraised value. “The cartels would pay off the first mortgage and skim the profit. They’d flip that same property until the loan was upside down and then walk away.”
Bottom line: You had a home appraised at $800,000 that wasn’t even worth $400,000, going into foreclosure. The cartels did the same thing with commercial properties, and just got richer, taking full advantage of what the system had actually created – and invited.
Now, we’re in the midst of mortgage crisis 2.0, with state attorneys general investigating the foreclosure practices by the banks and mortgage lenders. Mortgage documents of all sorts were treated in an almost lackadaisical way during the dizzying mortgage lending spree from 2005 through 2007. These missing and possibly fraudulent documents are at the center of a potentially seismic legal clash that pits big lenders against homeowners and their advocates concerned that the lenders’ rush to foreclose flouts private property rights. How this will all play out remains to be seen.
But what is at the heart of all this, as the author of GOOD COP, BAD MONEY so eloquently put it when referring to the cartels: “They didn’t care. They were getting wealthy and destroying the American dream…. They saw the prey in the water and they attacked.” The same could also be said about everyone involved in perpetuating this travesty.