By Kenric Ward
Anatomy of a real-estate debacle:
• Mel Martinez, secretary of Housing and Urban Development from 2001-2003, rewrites federal regulations to allow mortgage brokers to gouge unsuspecting applicants, rake in kickbacks and inflate the housing bubble.
• After two years on the job, he runs for and wins a U.S. Senate seat from Florida in 2004. (During the campaign, he talks tough about illegal immigration, but, upon taking office, he promotes amnesty for illegals.)
• Touting his Cuban heritage, Martinez continues to hype homeownership for lower-income minorities. By 2007, Hispanic homeownership hits an all-time high of 50 percent. The Federal Reserve reports that roughly half of these mortgages are higher-cost or subprime loans to buyers with impaired credit.
• With the bubble bursting and foreclosures mounting in 2008, Sen. Martinez announces a $541 million federal aid package “to put a floor on declining home values across our state.”
So there you have it: The guy who was in on the ground floor of this country’s housing collapse comes calling with a half-billion of your tax dollars to save the day. Thanks a lot, Mel.
Unfortunately, this is a bipartisan scheme.
The New York Times recently detailed how one of Martinez ’s predecessors at HUD, Henry Cisneros, used similar politically correct con games to juice the system.
Embracing the “ownership society” mantra, the Clinton Cabinet member loosened the rules on government-insured borrowers and vastly expanded the roles of Freddie Mac and Fannie Mae, the “government-sponsored” mortgage giants (i.e., less regulation; more taxpayer exposure).
For all his pandering, Cisneros wasn’t rewarded with a Senate seat, however, because he got caught up in a sex scandal involving payments to a former mistress. But he landed on his feet anyway: Upon exiting HUD, he was given seats on the boards of KB Homes and Countrywide, two of the biggest players in the decade-long housing boom.
He even started his own development company in Texas , with help from his old KB-Countrywide pals. And why not? When he was HUD secretary, he signed an agreement with Countrywide President Angelo Mozilo to use “proactive, creative efforts” to extend homeownership to minorities and low-income Americans. That set the stage for Martinez & Co.
The Bush administration’s WhiteHouse.gov Web site still displays this snippet of history, which sounds absurd in retrospect: “ Martinez has undertaken a comprehensive process to empower and protect homebuyers, and is actively working to reform and simplify the homebuying process and make it less expensive for consumers.”
If it appears that Washington ’s Democratic-Republican duopoly set up the housing train wreck, it is equally evident that politicians are shamelessly dodging any responsibility.
“I’m not sure you can regulate when we’re talking about an entire nation of 300 million people and this behavior becomes viral,” Cisneros rationalized to the Times, without a twinge of irony.
Congress may yet dig into the credit mess and the ensuing housing debacle, but don’t expect lawmakers to unearth the truth. Fannie, Freddie, et al. invested wisely inside the Beltway.
To date, no one has questioned Cisneros’ lucrative segue through the revolving door of apparent conflicts of interest. The media continue to unquestioningly swallow Martinez press releases as he builds a multimillion-dollar war chest for his 2010 re-election campaign.
Spreading $541 million in federal tax dollars to 49 Florida communities, including $13.5 million to Port St. Lucie and $5.2 million to Palm Bay , is a surefire way for Martinez to bank political IOUs and keep his name in a positive light. Well, sort of.
As detailed in a 2007 federal court case, “Culpepper vs. Irwin Mortgage Corp.,” Martinez used his HUD sinecure to promulgate rules that lined the pockets of mortgage brokers at the expense of unwitting and uninformed applicants. Payments of “yield spread premiums” added untold billions to the cost of mortgages — many of them to the same lower-income, minority borrowers Martinez claimed to serve and protect.
Now that tens of thousands of properties are falling into foreclosure, the senator’s answer is to pick the public’s pocket again with an “assistance” package that has all the earmarks of yet another pork barrel.
The package, according to Martinez , can be used to “offer downpayment and closing-cost assistance to low- and moderate-income homebuyers. State and local governments also have the ability to create land banks to assemble, temporarily manage and dispose of property.”
Translation: If you liked what Washington has done to the housing market, just wait until your local governments get a piece of the action.
This is tantamount to bank robbers Bonnie and Clyde claiming they were providing “financial services” to the community. The only difference is that they didn’t get away with it.
ETHNIC PANDERING? SI!
In 2001, President George W. Bush’s political strategist Karl Rove told the Washington Times how Mel Martinez’s role as HUD secretary fit into the administration’s electoral plans:
“If you’re a Mexican-American, if Mel Martinez comes to town and talks about his life story and this administration’s policies to encourage homeownership, and you hear Bush talking a tax cut, education and leaving no child behind, and he’s seen with (Mexican President Vicente) Fox, and the first place he goes when in Europe is Spain — you say, ‘Hey, Bush gets it. Our community is important to this guy.”’