Its low tide in Las Vegas.
Thats how Assistant U.S. Attorney Dan Schiess described the home mortgage fraud crisis in Southern Nevada on Thursday.
As the high sea of real estate prices dropped, an ugly truth was exposed.
When the market was going good, you could cover it up, Schiess said after the Operation Stolen Dreams news conference at the Lloyd D. George U.S. District Courthouse. Then the market turned and you leave debris on the beach when the tide goes out.
Schiess was right. The Southern Nevada Mortgage Fraud Task Force, part of President Barack Obamas interagency Financial Fraud Enforcement Task Force, so far has charged 123 defendants with arranging phony straw-buyer transactions that grossed more than $246 million locally.
From everything I heard Thursday, Schiess didnt take his imagery far enough. This is low tide at the BP oil spill.
Officials were unequivocal: This is only the first round in a long fight to bring mortgage fraudsters to justice through felony indictment and asset forfeiture.
Were not even near half, U.S. Attorney Dan Bogden said, dropping an anvil of a hint that more indictments and arrests are anticipated.
Its amazing, and more than a little troubling, to know that, as FBI Special Agent in Charge Kevin Favreau said, great damage was done to the local housing market by a handful of small, sophisticated, and organized groups. Although the straw-buyer practice wasnt all-pervasive, it didnt have to be.
The bust out of even a handful of superinflated home loans could ruin a neighborhood.
This isnt the story of a wishful buyer who fudged a little paperwork in order to fulfill the American dream of home ownership. Not one single-home purchaser was arrested. Authorities arent interested in amateurs.
Nor should the investigation be marginalized by the false belief that the only real victims were faceless lending giants with their own track records of rapacious behavior. This is about straw buyers scoring several loans with wholly fraudulent paperwork on behalf of shadowed operators whose experience in the local real estate and mortgage businesses enabled them to game the system.
Even some straw buyers were played for rubes, FBI Supervisory Special Agent Scott Hunter said, explaining that front men who agreed to buy one house later found their names on a half-dozen mortgages.
The greatest shame of all isnt included in the charges. Amid the debris that has washed up in many cases is the wreckage of broken dreams of good families. Fraud is one thing; the collateral misery wrought by those crimes is impossible to measure.
In Southern Nevada, whole neighborhoods took a roller coaster ride as insiders used straw buyers, then dumped the houses into foreclosure, crushing legitimate homeowners under the weight of falling value. Some homeowners got lucky and sold before the crash, but most were swallowed up.
We all know someone, a family member or a neighbor, buried by the mortgage crisis. Maybe they got in over their heads in an attempt to carve out their own American Dream. Perhaps they lost a job, then lost their home.
Others moved into neighborhoods never imagining they were investing their life savings and walking into the equivalent of a carnival shell game, or a boiler room operation where nothing they saw or heard was real. Those two-story semi-custom houses in Desert Shores, for example, looked like the ideal places to put down roots, raise children, and build some equity. For most people, a house is lifes most important investment.
But when the market cratered, the lawns went brown and the plywood went up. In a matter of weeks once-handsome neighborhoods took on a Dust Bowl feel.
Want to know the saddest part of all?
Our polluted tide hasnt yet reached its lowest point.
John L. Smiths column appears Sunday, Tuesday, Wednesday and Friday. E-mail him at Smith@reviewjournal.com or call (702) 383-0295. He also blogs at lvrj.com/blogs/smith.