You don't need statistics to know that Florida's homeowners are among the hardest hit by the one-two punch of the housing crash and Great Recession. Just tour the Tampa Bay area and count the "Bank Foreclosure" signs. The state has hundreds of thousands of foreclosures pending and one of the nation's highest rates of homeowners who owe more on their mortgage than their home is worth. Now government is simultaneously punishing some of those responsible and helping some homeowners struggling to hold on.
The FBI and federal prosecutors who were initially unprepared to pursue the endemic mortgage fraud that distorted the housing market are playing catch-up. Attorney General Eric Holder and other federal law enforcement officials announced last week that charges had been filed against 1,200 people on charges related to mortgage fraud in "Operation Stolen Dreams." The FBI has more than 3,000 cases under investigation — a welcome sign that this crime that destroys communities block by block is being taken seriously.
Locally, a federal indictment was issued against Sang-Min Kim, who made a fortune flipping houses using "straw buyers." All of those buyers, sellers, real estate professionals, appraisers, banks and lawyers who participated in fraudulent home sales should be looking over their shoulders.
According to the indictment, Kim, who is cooperating with federal authorities, fraudulently flipped about 80 homes from January 2005 to October 2008. Kim's Tampa Bay area dealings were initially revealed in the St. Petersburg Times in 2008. He would buy houses cheaply, then sell them at a big markup to a person paid by Kim to purchase the property. Kim and his co-conspirators would then pocket the mortgage money and let the property fall into foreclosure.
Meanwhile, a new program may soon provide mortgage relief to thousands of Floridians. Under the Florida Hardest-Hit Fund Program, Florida residents facing foreclosure who are unemployed, underemployed or are suffering a medical hardship may qualify for nine months of mortgage relief to be paid by the federal government. By the end of the year the Florida Housing Finance Corp. hopes to disburse $317 million to 12,000 qualifying homeowners. People suffering a job disruption will be able to keep their homes while they seek new employment, helping those families and the stability of neighborhoods. The payment is a loan to the homeowner to be forgiven over five years if mortgage payments are kept up. The program could provide a lifeline to struggling families that just need a little breathing room to get back on their feet.
There are many sides to the foreclosure mess. Direct help for homeowners in temporary distress and the aggressive prosecution of mortgage fraud are opposite approaches to cleaning it up, and they are both necessary to restore some stability to neighborhoods in Tampa Bay and throughout the nation.