Queens Mortgage Fraud
Called Worst in the U.S.;
State Still $3 Billion Short
By Henry J. Stern
April 13, 2010
The impasse between the governor and the legislature continues, with New York State's budget now two weeks overdue. There is no prospect of a swift resolution of the dispute. The legislature has proposed roughly six billion dollars in reductions; the deficit is 9.2 billion. That leaves a balance of 3.2 billion. Normally that gap would be closed by one-shots, by sweeping accounts holding agency revenues into the general fund, and by borrowing, either directly or through the back channel of authorities and other public bodies.
This year more attention has been paid to what may be euphemistically called "alternate sources of revenue." If the last three billion dollars in the gap is to be closed by reduced appropriations, thousands of state, county and city employees will face layoffs. With unemployment close to ten per cent, and above fifteen per cent among regard to older workers and the less educated, the job prospects for those laid off will not be bright. When they exhaust their unemployment insurance, some will seek public assistance, while others will go on SSI, or Supplemental Security Income, which is a Federal program funded by general tax revenues rather than the Social Security trust fund. SSI, established in 1974, was intended to aid aged, blind or disabled persons with little or no income. At this time, 7.6 million people receive SSI benefits each month. About 54 million people receive social security, a New Deal program that began in 1935, during the Great Depression.
Although the stock market has recovered most of the loss it sustained in what is now called The Great Recession, there remain numerous severe problems in real estate, particularly commercial property. Major losses lie ahead for thousands of banks who have lent out more than the current value of the property which is collateral for the loan, or the mortgage. We wonder what the federal response will be when loans are not paid, property is foreclosed, and then abandoned.
Some geographic areas have been particularly hard hit because the loans made by banks or mortgage companies were fraudulent or irresponsible to begin with. Today's Daily News, on p7, contains a startling story by Robert Gearty.
WE'RE NO. 1 IN CROOKED MORTGAGES, Jamaica Leads the Nation in Fraudulent Home Loans. Gearty's lede:
"Forget Las Vegas. Forget Miami. The No. 1 neighborhood in the U.S. for mortgage fraud is in the heart of Queens.
"A new study says a section of South Jamaica has the highest concentration of bogus loans in the nation, with zip code 11436 the absolute worst.
"First American CoreLogic, a mortgage and real estate data company, analyzed 80 million loans from Maine to Malibu from 2004 to last year.
"The firm says the fraudulent loan rate in the nine square miles of blue-collar Jamaica is four times the national level and tops other hotbeds of lousy loans like Orlando, Atlanta and Detroit…
"The fraud included lying about nonexistent income, inflating the value of homes by selling and reselling to co-conspirators, bribing appraisers and stealing deeds and identities." You can link to the full story here. You will be shocked, as we were, by what you read.
But even if loans are legitimate, and made with good intentions, they may require higher payments than the borrower will be able to afford, especially if a family member loses a job or moves out. The result can be foreclosure, leading to the abandonment of homes that, the News says, "attract vermin and squatters." As property values decline, the value of more houses will go underwater, which leads to tenants walking away from the property.
Lt. Gov. Richard Ravitch's plan, which calls for borrowing and promises of spending reforms that may or may not be enforceable, was a compromise, seeking to avoid fiscal irresponsibility and prevent the collapse of service delivery. It envisions strict controls, externally imposed, to provide fiscal discipline. The question remains whether the legislature, a sovereign body with far more legal power than city government, could extricate itself from the controls imposed to control spending. No one considers the legislature principled, so it is assumed that they will do what they can, including borrowing against projected income from tobacco bonds, to avoid making painful reductions in the workforce.
The reductions are indeed painful. Look at thirty-five hundred people who, it is reported, are losing their jobs because of the imminent closing of St. Vincent's Hospital in Greenwich Village. They will be better off than most job-seekers because they are in the ever-growing health field, which now consumes 16.2 per cent of the gross national product. But they will still have to find jobs in a down market, where opportunities are limited and competition is intense.
People's anger at economic conditions adds to their distress over governmental corruption and the misbehavior of public officials. Governor Spitzer's misconduct dashed the hopes of New Yorkers who had seen his election as a once in a generation opportunity for reform. His selection of David Paterson as his running mate, rejecting attorney Leecia Eve, whose qualifications appeared to be superior, resulted in a disappointing sequel to his own angst-ridden, truncated administration. Of course, we don’t know how Ms. Eve would have turned out, but her problems would probably be different than Mr. Paterson's.
New York is not a failed, corrupt, or narco state, although it has problems in all those areas. We have a political system in which the most qualified people, those with rational, moderate solutions to problems and the ability to relate to other people, are unlikely to become candidates for public office. Being a politician means adopting a life style that conflicts with family values, if only because of the amount of time it takes away from the family. The candidate is often caught in a perpetual quest for attention, preferably adulation. He sees everyone through the prism of how much money they can contribute or how many votes they can influence. In some cases, he sees them as potential sexual partners, which is a less sustainable pattern than seeking money or votes.
Politics has some similarities to living in a hierarchical system, like a religious order, the military or organized crime. The basis of success in politics is making people like you and support you, even when their opinions may conflict with yours on some issues. To exist in that universe requires a certain amount of dissembling. It is when that practice spills over into financial corruption, taking or giving bribes that big trouble may, or may not, result.
We assume with confidence that, for all the politicians that are exposed, arrested and convicted, there are others whose misdeeds remain undiscovered. This can be the result of fool's luck, skill in avoiding detection, or intimidation of potential whistleblowers, adversaries or even prosecutors, who are, on the state and local levels, elected officials themselves. But the sum of thefts of property and kickbacks on contracts does not hurt the financial health of the state as much as the subservience of elected and appointed officials to lobbyists and contributors. That conduct, though outrageous, is often legal even if one cannot prove that the official was paid off or otherwise illegally rewarded. Those who do the most damage operate just within the boundaries of law. Some public employees have long ago surrendered their judgment to others as the price of re-election, promotion or the benefits of imagined friendship.
The problem of improper influence on public officials deserves a higher level of public attention than it currently receives. 2010 is a good year to keep a close watch on the activities and affiliations of those who are our paid with our taxes. (Happy April 15.)
For those of you who wish to read further about these issues, we call your attention to True News, a blog written by the journalist Gary Tilzer. You can link to it here.
NOTE: The State fiscal year ends on March 31, according to Article 2, Section 3 of the State Finance Law. You can link to the law here. That day is the traditional deadline for the adoption of the budget by the State legislature, although it has rarely been met in recent years. It was intended that the budget for the new fiscal year, which begins on April 1, would be adopted by the close of the old fiscal year. The Constitution of New York State does not prescribe or proscribe the dates; they are statutory. We thank John Faso and Fred Dicker for calling our attention to the relevant provisions of law.
StarQuest #660 04.13.2010 1422wds |