THIS BAILOUT'S FOR YOU!
San Franciscans, and Californians, watched aghast as the federal government rewarded the reckless financial sector with trillions of dollars for causing more hardship than Americans or the rest of the world have suffered since the Great Depression... Lennar and the other uber overbuilders and lenders stepped up for another $33 billion handout in the Worker, Homeownership and Business Assistance Act of 2009, which became law on 11.06.2009. Lennar spent $240,000 Lobbying for its share, proving yet again that politicians offer an astounding return on investment, and, prompting NY TImes financial columnist Gretchen Morgenson to ask "would it be so terrible if some builders that lost their heads during the housing mania ceased to exist?"
THIS BAILOUT'S FOR YOU!
by Ann Garrison
San Francisco, and California, come to the aid of a subprime lender, Lennar
San Franciscans, and Californians, watched aghast as the federal government rewarded the reckless financial sector with trillions of dollars for causing more hardship than Americans or the rest of the world have suffered since the Great Depression.
Few seem to have understood that the City and State have come up with their own bailout, thanks to Proposition G followed by State Senator Mark Leno's Senate Bill 792, which hands yet more land, including 23 acres of pristine state parkland, to the South Florida-based Lennar Corporation.
Lennar is not just a big industrial homebuilder. Lennar is also a big mortgage lender.
Like D.R. Horton, Pulte, and all the rest of the big industrial homebuilders, it has its own mortgage lending subsidiary, Universal American Mortgage Company, created to facilitate the sale of its own properties. UAMC's top competitors, according to Hoover's, are Bank of America, and big builder/lenders D.R. Horton, and Pulte Homes.
During the years leading up to the subprime loan meltdown, home builder mortgage operations plied customers with incentives far beyond the typical 1% teaser rate. On 10.13.06, Marketwatch reported, in "Home builders up ante to lure buyers," that:
"The NAHB found 55% of companies were offering home-option items such as granite countertops and landscaping at no charge, up from 37% the prior year. About 43% were offering to pay the closing costs on the buyer's previous home. . .
Forty-four percent of builders were reducing home prices, 4% were including a new car with the home and 5% were offering a free holiday trip."
Marketwatch quoted Lennar CEO Stuart Miller on the increasing use of incentives and price cuts, and Lennar's need to keep cash flowing, at whatever cost, even as October 2006. Why? Because they had overbuilt, way beyond what the housing market justified, and now they had to keep overlending to close on more housing, at higher prices, than buyers had money to pay for.
Less than a year later, in "House of Cards," published in Builder Online, 08.07, John Caulfield described the pressure Lennar had put nto only on borrowers, but also on UAMC managers:
Another source, who worked 2 ½ years as a manager for one of Lennar's UAMC offices in Nevada before she was laid off in October 2006, says the pressure to approve buyers for loans was overwhelming. That pressure came directly from Lennar's divisional president, "who told us the relationship between the builder and the mortgage company was master and slave.' When this source says she got tougher about qualifying buyers, Lennar removed several communities from her loan office's territory. When asked why Lennar would sanction its mortgage subsidiary to approve loans for buyers it knew would not be able to pay them, this source replies, Lennar wasn't thinking long term; it's a publicly traded company that's judged on how many homes it closes.
Never mind that all the mortgages Lennar's UAMC had written to close deals on Lennar's property were likely to go bad.
Or, that the prices of Lennar properties, even when deep discounted, had been artifically inflated by UAMC's easy credit.
Or, that financially unsophisticated homeowners would eventually drain whatever resources they had to keep up with negative amortization payments, adjustable rate mortgages, rising sometimes as high as 15%, balloon payments, and distant "loan servicing" bureaucracies, which demanded payment and threatened foreclosure, but, at the same time, refused even to tell borrowers the names of their lenders---after UAMC had exited, by selling their loans into the secondary mortgage market long before they had time to go bad.
Much has been written about the even more Machiavellian machinations of investment banks like Deutschebank, Morgan Stanley, and Goldman Sachs, who, after buying multimillion dollar bundles of loans from Lennar, insured themselves against losses they knew were coming, and sold "pass through certificates," a.k.a., income strips, to pension funds, and municipalities, counties still scrambling to recover.
Result? A staggering upward transfer of wealth, followed by the subprime meltdown and global recession, wose than any since the Great Depression of the 1930s.
Pain from San Francisco to D.R. Congo, where the all important mining contract review was finally abandoned under World Bank, IMF, and recession pressures.
Foreclosures, layoffs, shrinking property and income taxes. And, throughout 2009, budget battles in city, county, and statehouses all over the country, including California, and San Francisco.
What to cut next? The schools, the nurses, inhome health services, police, fire department, psychiatric or HIV care?
As the federal government handed hundreds of billions, then trillions, to the financial sector, including the investment banks and the executive elite who had already sucked so much of he rest of the country's wealth upwards.
Lennar and the other uber overbuilders and lenders stepped up for another $33 billion handout in the Worker, Homeownership and Business Assistance Act of 2009, which became law on 11.06.2009. Lennar spent $240,000 lobbying for its share, proving yet again that politicians offer an astounding return on investment, and, prompting NY TImes financial columnist Gretchen Morgenson to ask "would it be so terrible if some builders that lost their heads during the housing mania ceased to exist?"
Et tu, San Francisco? And California?
Do we too really have to reward Lennar and its UAMC Mortgage Subsidiary, with more "public private partnership," and more land, including 23 acres of waterfront parkland?
The company has not changed course. On April 14th, 2009, a PR firm working for its Southeast Florida division announced its weekend sales event, "This BAILOUT'S FOR YOU":
PR Log (Press Release) Apr 14, 2009 LENNAR CELEBRATES THIS BAILOUTS FOR YOU SALES EVENT THIS WEEKEND IN SOUTH FLORIDA MIAMI, Fla. - Corporations should not be the only ones benefitting from bailouts. This weekend April 18 and 19, the Southeast Florida division of Lennar, one of the nations leading homebuilders, is bailing prospective homebuyers out with incredible prices, incentives and interest rates that make it simple to buy a new home in todays current real estate market.