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A Times Editorial

Our homegrown financial crisis

There are so many zeroes involved in the global financial meltdown it is easy to forget one way it happened here at home. In the past four years, Sang-Min Kim, a 34-year-old tattoo parlor owner, bought and sold some 90 homes across Tampa.

Most of those he sold are now vacant. Many loans dwarfed the true value of the properties, and some borrowers had no visible means to repay. And the bad mortgages were approved or assigned by many of the same institutions that are lining up for billions of dollars in a taxpayer bailout. No wonder there is little public sympathy for financial institutions whose greed and recklessness helped create this mess.

The U.S. attorney in Tampa, A. Brian Albritton, said last week the profile of Kim by the St. Petersburg Times' Michael Van Sickler raises "concerns" that interest the chief federal law enforcement officer for middle Florida. They should. Kim made millions selling homes in some of Tampa's poorest neighborhoods. A stucco home on N 17th Street sold for $300,000 in 2006 with a no-money-down mortgage. The owner defaulted, the bank took it back and now the house could be had for $35,000 cash. Another buyer defaulted within months on a $138,000 mortgage for a home in east Tampa; it is now listed at $29,000. According to Hillsborough County property records, buyers paid Kim $10.7-million for homes he bought for $6.5-million. Many have code violations. More than a third of the homes he sold are in default.

Kim made his money during the same period that the Bush administration — in response to aggressive lobbying by the banks — backed off cracking down on the mortgage industry. Records released last week show that some lenders warned of "horror stories" from the proliferation of no-money-down, interest-only mortgages. Yet regulators stalled any action after hearing from — among others — Washington Mutual that such mortgages were "more safe and sound" than many fixed-rate mortgages. This year, WaMu became the biggest bank failure in U.S. history.

Regulators backed off from proposals that could have stopped some of the very abuses the Times found in Tampa. The moves would have required banks to increase efforts to verify that borrowers could repay and put a cap on risky mortgages to protect the holders of mortgage-backed securities. But dozens of sales by Kim that ended up in foreclosure showed almost no oversight. Multiple loans from the same bank branch would go to questionable borrowers. Some institutions made multiple loans within months to people buying from Kim only to have all those loans default.

Federal authorities need to investigate these failures. One "closer" — who processed loan applications that an underwriter had already reviewed — likened her job to an assembly line. "We had quotas we had to meet," she told the Times. "We didn't have time to look at them." In the FBI's Tampa division, the number of "suspicious activity" reports from lenders nearly quintupled between 2004 and 2007, from 430 to 2,041. Though that is a heavy case load for an agency also fighting terror, mortgage fraud has exacted a heavy toll on the nation and this community. A report released Tuesday put Florida first in the nation and Tampa second in the state in the amount of suspicious loan activity. Holding those who committed fraud and crippled the financial system is a good use of the government's time and resources.

Our homegrown financial crisis 12/06/08 [Last modified: Thursday, December 11, 2008 12:06pm]
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