Economy so bad that scam artists suffer, says Justice Dept. official

Neil Munro White House Correspondent
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How bad is the post-bubble economy?

The economy is so bad that even con artists are giving up on real-estate scams, Tom Perez, a top Justice Department official, told an audience of progressives on Friday.

“Equity stripping is largely a thing of the past because there’s no equity to strip,” said Perez.

“Equity stripping” is a scam where con-artists persuade confused or ill-prepared people to sign home-loan contracts that transfer the property rights. Victims — often old or ill-educated — are left without their homes, but with much new debt.

Instead of equity stripping, the con artists are moving to new areas, Perez said. “Unscrupulous lenders are moving from [one legal] subject matter to [another] subject matter,” he told a May 4 meeting at the Center for American Progress.

Perez, a veteran civil rights lawyer, has changed his focus.

He and his deputies are filing lawsuits against mortgage sector firms for treating minority borrowers differently from white borrowers.

A colossal amount of real estate equity was destroyed when the 1994-2008 real estate bubble burst.

Worst hit were the African-American and Latino minorities that government regulators were hoping to aid when they began inflating the bubble.

Median household wealth among Hispanics fell from $18,359 in 2005 to $6,325 in 2009, according to a July report by the Pew Research Center. That’s a 66 percent drop.

The media wealth of African-American households fell by 53 percent, to $5,677.

The media wealth of white households fell by 16 percent to $134,992.

The bubble began its growth in 1994 when President Bill Clinton issued new regulations that pressure banks to steer mortgages towards African-Americans and Hispanics.

President George W. Bush extended the policy until the bubble bust in 2008.

Established banks delegated most of the risky task to local mortgage sellers and to new mortgage firms, such as Countrywide.

In turn, these non-bank vendors made their money selling mortgages to poor people by raising rates and fees before selling the government-backed shaky loans to Wall Street.

Once the bubble bust, and Wall Street crashed, progressives decried the new mortgage firms’ deceptive practices, fraudulent documents and jacked-up fees.

Since then, Congress passed new federal regulation of the financial sector, and Obama’s deputies — including Perez — have launched a wave of massive, multi-billion dollar fraud or discrimination lawsuits against banks and mortgage companies.

“The American dream of home ownership has come crashing down for a lot of reasons … regrettably, one of those reasons has been discrimination,” Perez claimed.

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