Back in February the New Yorker wrote an article about how Florida was sort of the epicenter of the real estate madness, full of frauds and crooks, and that the entire state was essentially a giant ponzi scheme. The story mentioned one man in particular, Sonny Kim, who sold 90 properties, netting $4 million. Here is a link to a story in the local paper about Mr. Kim. The buyers were mostly in on the scam, putting no money down, getting liar loan mortgages from foolish loan officers, and then walking away, sticking the bank (meaning the taxpayers) with the house while Mr. Kim kept his proceeds.
Here is how it works: “A common scam works like this: Someone with cash buys a crummy house cheap. A mortgage broker signs on and finds an appraiser to inflate the value. The broker shops the loan application, with false data about the borrower and the house. Bank loan officers approve it.”
Sonny Kim bought one house for $100, and three months later “flipped it for the sum of three hundred thousand dollars, with the help of a no-money-down mortgage from a subsidiary of Washington Mutual Bank, which later foreclosed on the house.”
I saved the article, so that I could go back to it later and see what happened to these folks. According to the St. Petersburg Times, which broke the story, nothing has happened. Sonny Kim hasn’t been charged with any crime. The title agent who managed a third of Kim’s deal, and was arrested on other fraud charges, hasn’t been charged for these deals. Nobody at WAMU is in jail. So all the people who made money on these fraudulent deals are sitting pretty, spending their money on mojitos, while the taxpayers are footing the bill for the bailout. That seems wrong somehow.
In fact, here is a quote from another house flipper, who started his real estate career while on probation from a cocaine conviction: “I drive a Hummer and own a 1970 vintage Oldsmobile 442. I always wanted diamonds and now I own them legally and no one can take them away.”