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A Times Editorial

Housing collapse fueled by fraud

The great housing bubble has burst, and it is clear that mortgage fraud played a key role in a collapse that now threatens the entire economy. Florida is a magnet for con artists, and the easy money too many banks were throwing around for big mortgages on homes with inflated price tags made them easy marks. Banks lost millions because nobody made the appropriate background checks, and it appears some real estate agents were complicit.

St. Petersburg Times senior correspondent Susan Taylor Martin uncovered a cottage industry of deceptive mortgage practices in our region. In November, Martin reported on the actions of Lori Polin, an agent for Re/Max International, who worked with attorney Allen Boyarsky to sell a number of homes at artificially high prices.

Now Florida Attorney General Bill McCollum has brought a lawsuit against Boyarsky and two other "ringleaders" for violations of the Florida Deceptive and Unfair Trade Practices act. The lawsuit claims that they engaged in a mortgage fraud scheme, which also included Polin and two other real estate agents, that cheated lenders of more than $37-million and led to the foreclosure of some 50 homes in Central Florida.

The alleged scam operated through collusion between real estate agents, mortgage brokers and others who set up straw buyers to purchase homes at prices far above the home's initial list price. A mortgage for 100 percent of the purchase price would be taken out, and the extra cash between the mortgage amount and the money used to pay the home seller was pocketed. Then the home would be left to go into foreclosure. The apparent con left behind a path of devastated neighborhoods.

McCollum didn't name the real estate agents as defendants in the suit. Oddly enough, the agents are exempt from lawsuits under the deceptive practices act. Instead, real estate agents are policed by the Florida Real Estate Commission. But the deceptive practices act has teeth that the commission doesn't. McCollum has called on the Legislature to revisit the exemption, and it certainly would be worth examining.

Why should real estate agents be protected from lawsuits under the deceptive practices act when such improper behavior can ruin lives and undermine the stability of entire neighborhoods?

Housing collapse fueled by fraud 09/27/08 [Last modified: Thursday, October 2, 2008 10:46am]
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