TAMPA — Thousands of miles from the trading floors of global stock markets, an abandoned house in one of Tampa's poorest neighborhoods is an improbable place to learn about why the world's financial system is collapsing.
But if you want to understand how we got into this mess, the stucco house at 4809 N 17th St. isn't a bad place to start.
Beer bottles and shards of glass litter the yard. A blue tarp covers much of the rotting roof. Boards shutter the windows.
This husk sold for $300,000 in 2006 with the help of a no-money-down mortgage from a subsidiary of Washington Mutual Bank. The owner defaulted; WaMu owns it now. Listed for $52,000, the house could be yours for $35,000 cash.
"What we had here was an obvious case of mortgage fraud," said Josh Parker, a Coldwell Banker Realtor.
The 17th Street house is one of a constellation of 90 homes stretching across Tampa, all bought and sold in the past four years by a 34-year-old tattoo parlor owner.
Most of the homes Sang-Min Kim sold are empty now. Many have code violations, and are clustered in impoverished neighborhoods such as Belmont Heights and Sulphur Springs.
The trail of foreclosures and blight is lined with the bad mortgages approved or assigned by Wachovia, Washington Mutual, Bank of America, National City Bank, Lehman Bros., Fannie Mae, Freddie Mac and Wells Fargo.
The loans — many made by banks now getting billions in a taxpayer bailout — dwarfed the true value of the properties. Some borrowers had no prospects to suggest they could pay off the loans. Multiple loans from the same bank branch sometimes went to a questionable borrower within weeks of each other.
"It's obvious the banks weren't paying attention, or worse," said Richard Hagar, a property fraud expert.
• • •
Kim, who has no criminal record in Florida, made millions selling houses. More than a third of the homes he sold are in default, with more expected. Some of the buyers have criminal records as drug dealers.
Real estate is popular among drug dealers, experts say. It's a cash investment that allows them to launder money, and the returns are terrific. Flipping a single house, a dealer can score more than he can grinding it out on a street corner for a year.
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.
In recent years, this scam went unchecked as bank oversight mostly vanished. Banks had traditionally held onto mortgages for 30 years and had a self-interest in seeing that borrowers could repay the loans. But as lending rules were relaxed, banks sold the riskiest loans to investment firms, which dumped them into pools of thousands of other mortgages that investors would buy.
This pass-the-buck system did such a poor job policing itself, Hagar said, that "government now considers (mortgage fraud) a national security threat that's undermining our banking system.''
All it takes to prevent, Hagar said, is someone at the bank to ask a couple of questions. "This kind of fraud should be easy to spot."
• • •
"Sonny'' Kim, who was born in South Korea, owns Body Design Tattoos, an Asian-themed tattoo and body piercing parlor on N Florida Avenue. He's also listed as an owner of a flea market.
He started flipping property four years ago. In late 2005, he formed a real estate investment firm. Buyers paid Kim $10.7-million for homes he bought for $6.5-million, according to Hillsborough County property records.
What's his secret? Kim won't say. He politely declined any comment for this story.
His homestead tax exemption is on a house in Pasco's Meadow Pointe subdivision appraised at $215,000.
Kim lived there until recently, said Greg Ingram, who lives next door but never got to know his neighbor. Judging from a steady rotation of flashy cars in the driveway — a Hummer, a Mercedes, a Lexus, a Cadillac — Ingram assumed Kim worked at a car dealership.
In 2006, Kim bought an empty lot in a gated Lutz subdivision for $220,000 where he built a two-story, five-bedroom, five-bath house. Although it is not registered as his homestead, Kim lives there. Valued at $1.1-million, it's a world away from the homes Kim sells for profit.
Take the 54-year-old stucco house slumped at 7016 N Oregon Ave. in central Tampa. The back facade is crumbling. In October, a large maple branch lay in the front yard, tangled in an electrical wire it snapped on the way down.
Neighbors said they had not seen anyone in the house for six months. A June 18 legal notice tacked to the door cited the owner for weeds, debris and junk.
The deed from 2006 lists Kim's investment company as the seller and a Tampa woman as the buyer. Haydee Llanes got a $200,000 mortgage — more than double the property appraiser's current market value — and defaulted this year.
Her phone is disconnected. Her address is listed at a house that's abandoned. She defaulted on two other loans issued that same year. One was for a house she bought from one of Kim's business associates.
His name is Francisco Acevedo. Law enforcement knows him well.
• • •
In 1999, Acevedo made the mistake of paying a midnight visit to a home in Land O' Lakes that Pasco County sheriff's deputies were watching. They stopped him after he left the home and found $24,000 cash in the trunk of his car.
Prosecutors said Acevedo was the main source in a drug ring that sold $70,000 of cocaine a week in Hernando, Hillsborough and Pasco counties.
He shows up time and again in Sonny Kim real estate deals. He and his wife acquired seven homes from Kim. In more than a dozen other deals where Acevedo bought or sold homes, Kim prepared the paperwork.
After Acevedo's arrest for cocaine trafficking, Kim wrote the judge, describing Acevedo as a "hard-working citizen" deserving of a second chance.
Acevedo pleaded guilty to trafficking and got two years in prison. After his release on probation, he and Kim managed a property maintenance company together.
Now 31, Acevedo has his own real estate investment company called the Acevedo Investment Group. "Take control of your future," says the company Web site. "In America, the most common way to accumulate wealth is through home ownership."
Since February, he has been sued four times for foreclosure. His wife has defaulted on three mortgages. His father defaulted on a $164,000 mortgage for a home he bought from Sonny Kim.
Acevedo did not respond to messages seeking comment.
• • •
It takes 29 pages for the Florida Department of Law Enforcement to list the 45 times Thermozi Thomas has been arrested since 1980. Marijuana and cocaine possession and distribution. Arson. Insurance fraud.
He pleaded guilty for the 1999 false imprisonment of a woman he drove home from a bar. The arrest report said he wouldn't let her go until she had sex with him. While he smoked crack, the woman called 911.
Last year, a judge ruled he was "incompetent to proceed'' on a cocaine charge and let him go.
Through the years, most of the charges against the 46-year-old Thomas have been dropped, often because he was deemed incompetent to stand trial. His former lawyer says Thomas is schizophrenic.
Since 2000, Thomas has bought and sold about 35 homes, most with quit-claim deeds that don't show the true sales price. Kim acquired at least six homes from Thomas.
Thomas — repeatedly ruled incompetent for trial — prepared documents in at least two deals with Kim. After his latest arrest, Thomas was placed in a state hospital, said his former attorney, Ronald Young.
"I can't imagine this guy as a real estate magnate," Young said. "Unless he's the greatest actor in the world, I have a funny feeling that someone took advantage of him. There's no way he was in any shape to flip homes."
Then there is Andre Scott, arrested in 2003 after delivering cocaine to an undercover officer in a Kash n' Karry parking lot.
While on probation, Scott started flipping subpar houses. He said in a 2006 interview with a promotional magazine that "house hustling'' gave him an honest way to live a life of luxury.
"I drive a Hummer and own a 1970 vintage Oldsmobile 442," Scott said then. "I always wanted diamonds and now I own them legally and no one can take them away."
Scott is a witness on at least one-third of the deeds for homes sold to Kim. Of those, Kim sold more than a dozen homes to people who later defaulted. Kim sold two homes to Scott in August and September. Scott paid him nearly $100,000 more than Kim paid for the properties.
In October, when Scott was arrested on a domestic battery charge, he listed his home address as the Pasco house that Kim owns.
Scott declined to comment.
• • •
Deanna Jones notarized dozens of Kim's deals, including many where the buyers are now in default.
"I can go home and sleep at night," she said. "That's all that matters."
Jones said Kim did nothing wrong by involving ex-felons in his deals.
"You're saying criminals can't buy or sell property?" she said. "Why don't you write about all the teachers molesting kids? That's a bigger problem, don't you think?"
Jones pleaded guilty this year to grand theft and criminal use of personal information after she ran up about $10,000 in fraudulent credit card charges. She got 18 months probation.
Jones works for a Broward County title agency operated by Howard Gaines. A federal grand jury in Fort Lauderdale indicted him in June. Gaines was part of a conspiracy to obtain mortgages by using straw buyers, according to the indictment. As title attorney, he was accused of falsifying documents to the bank to make it look like the buyers qualified for the loans.
The indictment covered only transactions in South Florida. Gaines has a Tampa office that leases space in a building owned by Kim. His company processed more than one-third of Sonny Kim's sales in Hillsborough County. Of those, at least 18 have defaulted.
When asked if Gaines would comment, Jones instant messaged him, then read aloud his reply message. "He just said, 'Don't give (the reporter) my number, I have nothing to say.' "
• • •
Five mortgages for people buying homes from Kim in Tampa were approved in Florence, S.C., by a subsidiary of Washington Mutual Bank. The deals, worth a total of $1-million, went through within five months of each other. All defaulted.
Asked if the banks saw any red flags, a WaMu spokeswoman cited privacy and would not address specific cases.
Nor would officials at Wachovia comment on three loans for a total of $597,000 that were made to Frank and Sarah Acevedo within two months of each other for homes they bought from Kim. All three defaulted.
Kim sold six homes to buyers using $1.2-million in mortgages bearing a lender address of Suite 250, Bayport Plaza: the local home of First Franklin, then a division of National City Bank. The mortgages were approved in a matter of months; all defaulted.
Near Tampa International Airport, with its gleaming glass facade, marble floors and tenants such as Boeing and Morgan Stanley, the 11-story Bayport Plaza is a high-rent repository for a series of deals involving near-worthless real estate.
From here, First Franklin approved a $138,000 mortgage for a yellow clapboard house on N 34th Street that Kim sold in 2006. It has particle board nailed across a side window and dirt smeared along its front. The buyer defaulted within months. It's listed now at $29,000.
"Amazing. I didn't know you could get such high prices in that part of Tampa," said Dianne Hart, CEO of the East Tampa Business and Civic Association, which builds houses in struggling neighborhoods. "And the banks approved these mortgages? Well, I guess that explains why we're in the situation that we're in."
Inez Albury is the only name from First Franklin that appears on the public documents for that loan and two others in Sonny Kim deals that defaulted.
Her job was "closer," meaning Albury processed the loan applications after an underwriter had reviewed the appraisal justifying the loan amount and the borrower's credit and criminal history. She lost her job in late 2007 as the boom ended with a thud.
During the good times, Albury described an assembly line approach to keep up with demand at her office. Managers made it clear they needed to hit their numbers each month.
The pressure was intense by 2006 and early 2007, she said. She reviewed as many as 20 loan applications a day, sending each one down the line to a title agency, sometimes just minutes before a closing. She never rejected one.
"We had quotas we had to meet," Albury said. "We didn't have time to look at them."
The house at N 34th Street is now listed at one-fifth of the loan amount she processed. The loan was approved for a man arrested for delivering cocaine and multiple other charges.
"That's ridiculous," Albury said. "I felt like it had to be a good loan by the time it reached me. I was just doing the job I was taught to do. I wasn't the one making the decisions."
Getting an explanation from First Franklin is impossible. Its Tampa office closed this year. The company was bought in late 2006 by Merrill Lynch, which was trying to grab a share of the sub-prime profits it saw competitors like Lehman Bros. making.
When that market tanked, Merrill Lynch found itself stuck with billions in junk mortgages. Under pressure, it merged with Bank of America in September.
Washington Mutual and Wachovia also have gone under or were forced to merge.
• • •
Kim's sales represent a miniscule fraction of mortgages these banks approved, but they illustrate how reckless the lenders became.
Dissect any of the 35 sales involving homes that ended up in foreclosure after they were sold by Sonny Kim, and it's hard to believe that lenders made any attempt to verify anything.
That's no surprise to prosecutors and experts who have reviewed thousands of mortgage fraud files. They say that often what allowed scams to work were banks that freely approved loans for borrowers who made absurd claims, like the carwash employee who supposedly earned $40,000 a month.
"Saying there was lax oversight is too kind, there was no oversight," said Doug Pollock, an expert witness for federal agencies prosecuting fraud. "The whole reason we're in this mess is because of the lenders. This is corporate greed all the way up the ladder."
Nothing will improve without accountability on all levels, Pollock said, especially as the same banks get billions in a taxpayer bailout.
"The bad guys took advantage of a weak system," he said. "Law enforcement needs to prosecute these guys. But we're forgetting who's really responsible, and that's the bankers. No one is holding them accountable or making them change the way they do business.''
But the nation's top regulators suggest there's little payoff in a crackdown.
"There's no question that somewhere in this terrible mess many laws were broken," the chairman of the Securities and Exchange Commission, Christopher Cox, recently told Congress. "But, you know, cleaning up the mess through law enforcement after the fact, while important, is not ideal."
Federal mortgage fraud investigations are typically triggered after a lender files a "suspicious activity'' report. In the FBI's Tampa division, the number of such reports nearly quintupled between 2004 and 2007, from 430 to 2,041. This expanding caseload is swamping an agency that since 9/11 diverted most of its investigators to counterterrorism.
Rampant fraud has created market conditions that encourage more manipulation. As home prices fall because of the glut of foreclosures, the banks are desperate to sell. Someone flush with cash could do well.
Despite the bleakest market in years, Sonny Kim has sold 25 homes this year.
He fetched $185,000 in September for a home in Belmont Heights that had an appraised value of $128,000.
Kim keeps buying, too. On Oct. 20, he snapped up a house south of Bearss Avenue that sold for $198,000 in 2006. Kim paid just $83,000.
Kim bought it from WaMu. The owner had defaulted on his mortgage, and the bank needed to unload the house.
Times staff writer Jeff Testerman and researcher John Martin contributed to this report. Michael Van Sickler can be reached at firstname.lastname@example.org or (813) 226-3402.
A crumbling Tampa home sold for an astonishing
Today the bank will take
A tattoo parlor owner bought and sold
many now in default.
Put enough deals like this together and you get ...