Property flipping took toll on Florida housing market

The Sarasota (Fla.) Herald-Tribune reviewed 19 million Florida real estate transactions to determine the impact of housing fraud on the collapse of the housing market. "The year-long investigation found that more than 50,000 Florida properties were flipped under suspicious circumstances from 2000 through 2008. Those flips artificially drove up housing prices and tax bills and contributed to the crush of foreclosures that has gutted the real estate market." In Sarasota and Manatee counties, nearly half a billion dollars in defaults are linked to professional property flippers.

A Center for Public Integrity investigation found that for years lenders have pressured appraisers to inflate home values to obtain higher mortgages. The article by Joe Eaton states, “In addition, the Center has obtained copies of lenders’ ‘blacklists’ containing the names of thousands of appraisers; some appraisers say lenders used those lists to exclude those who refused to inflate home values."

A three-month investigation by voiceofsandiego.org examined a real estate scheme involving three condo projects. According to the article written by Kelly Bennett and Will Carless, “The buyers were straw buyers, individuals who agreed to rent out their identities and good credit scores to a Bay Area man named Jim McConville, whose team obtained mortgages in their names but didn't follow through on their promise to make the payments.”

Working off a report from Zillow.com stating that 29 percent of homes in the Seattle-Tacoma-Bellevue area sold at a loss during the final months of 2008, Karen Gaudette and Justin Mayo of The Seattle Times extended the analysis and traced the depreciation trend back to 2005. They also compiled lists of the cities in Snohomish and King counties suffering most from the real estate market collapse.

An investigation by Jake Bernstein and A.C. Thompson of ProPublica explores how small community banks around the country are failing after years of profiting off commercial real estate and development loans.  Silver State Bank of Nevada was closed by the FDIC in September.  "The bank made its biggest bets not on home mortgages, but on loans to developers across Nevada and Arizona. Its demise highlights an aspect of the financial crisis that's been overshadowed by the crash of Wall Street and its megabanks: how small banks are suffering from a wave of defaults on construction and development loans that could cause dozens more to succumb in the year ahead...In a worst-case scenario, the FDIC insurance fund, which stood at $34.6 billion in the third quarter of 2008, could run out and require a taxpayer bailout."

A report by John Gittelsohn of the Orange Country Register details how Daniel Sadek, a subprime mortgage lender, was bailed out by Citigroup. Sadek was the founder of Quick Loan Funding which wrote over $4 billion in subprime loans before its demise in 2007. Citigroup, recipient of the largest federal bank bailout, offered Sadek modified loan terms in the summer of 2008 in an effort to salvage a mortgage he had fallen behind on. He defaulted on the modified loan in December. "That Sadek even got a second chance with Citi angered industry watchers who complain that banks have done too little, even with billions in federal assistance, to help borrowers facing foreclosure."

Cary Spivak and Daniel Bice of the Milwaukee Journal Sentinel identified the four inner city neighborhoods hit the hardest by the mortgage meltdown in Milwaukee and zeroed in on the lending practices.  The reporters found that many of the people who lost homes to foreclosure never should have gotten loans in the first place. But lenders eagerly wrote loans to people despite poor credit ratings, numerous bankruptcies and even criminal convictions for financial crimes such as forgery and food stamp fraud.

Mitch Weiss of the Associated Press found that the system set up to protect consumers from rogue appraisers following the savings and loan crisis nearly 20 years ago has failed, playing a major role in America's housing collapse. His six-month investigation showed more than two dozen states and territories are violating federal law by failing to investigate and resolve complaints about real estate appraisers within a year. As a result, hundreds of appraisers accused of wrongdoing are allowed to stay in business. Weiss also found that the only tool federal regulators have to force states into compliance is so draconian that it has never been used.

Using Home Mortgage Disclosure Act (HMDA) data, Kristi Piehl, Nicole Muehlhausen and Mike Maybay of KSTP evaluated the housing market in Minnesota. They analyzed 16 years of data to see how the mortgage crisis has impacted the state. In some counties, foreclosure rates have increased by over 400 percent over the last three years. Interactive maps of mortgage applications and denials, as well as foreclosures, can be found on the KSTP website.

The HMDA data for this story was provided by IRE and NICAR.

Government records and interviews revealed that a number of lucrative land deals in Prince George's County have gone to individuals with ties to County Executive Jack B. Johnson. An investigation by The Washington Post's Cheryl W. Thompson and Mary Pat Flaherty found county-owned land had been sold to people linked to Johnson on at least 11 occasions since he took office in December 2002.