Once again the “nobody saw this coming” meme gets exposed as, well, a fraud. This is from an investigative series by the Sarasota Herald-Tribune. And pay attention to some of the numbers involved, to the scale of this thing, just in this one local area:
The Herald-Tribune investigation found that mortgage fraud ran rampant all over Florida. The newspaper looked for just one kind of fraud — illegal property flipping — and found $10 billion in suspicious deals this decade.
Lawmakers passed a law in 2007 making mortgage fraud a crime in Florida for the first time, and state officials created mortgage task forces and opened a hot line to gather complaints.
But even now, two years into a recession brought on by real estate speculation and fraud, state and local law enforcement is doing almost nothing to prosecute past fraud or prevent future fraud….
In November 2005, when the real estate market in Florida had just begun to slow, the state’s top law enforcement agency issued a warning that mortgage fraud was about to wreak financial havoc.
In sober language, a 36-page Florida Department of Law Enforcement report explained that banks would collapse and losses would be counted in “hundreds of billions of dollars.”
The level of fraud would rival the Enron case and the Savings and Loan collapse of the 1980s, the intelligence report warned.
The report, which was not released to the public but was sent to prosecutors and law enforcement officials across the state, laid out a series of responses to help prevent or lessen the disaster.
But instead of heeding the warning, most law enforcement officials — including Earl Moreland, the elected state attorney for Sarasota and Manatee counties, and Bill Balkwill, Sarasota County’s sheriff at the time — did nothing.
…. the amount of fraud dwarfs the number of cases being pursued, the Herald-Tribune found. The Herald-Tribune analyzed nearly 19 million property transactions looking for one type of housing fraud — illegal property flipping. The newspaper found more than 50,000 transactions in which prices increased so much, so quickly, that fraud experts interviewed by the newspaper deemed them highly suspicious.
These were the mortgages that Wall Street bought up and securitized, selling to banks and investors all over the world. These were the bonds the credit rating services said were AAA investments.
And the walls came a-tumblin’ down.