"WHAT HAS happened to the neighborhood is so unfair. So terribly unfair." This lament by a 70-year old Northeast Washington resident, Korea Strowder, captures the hurt of an eyewitness to the slow destruction of her once stable Trinidad neighborhood in the early 1980s. But as Washington Post Staff Writer Kirstin Downey reported in a recent series of articles, "The Real Price of Housing Fraud," the despoiling of Mrs. Strowder's (and other) working-class Washington neighborhoods was more than unfair. It was criminal, and it stands today as the most visible consequence of the largest real estate fraud epidemic in this city's history.
The series detailed how real estate speculators purchased District rent-controlled apartment buildings, then secured inflated real estate appraisals on the buildings and illegally obtained FHA-backed mortgage loans in order to resell the buildings at inflated prices for quick profits -- often to owners who were fronts. These new owners, with inflated mortgages, tried to get income out of the overpriced buildings by squeezing the tenants with sharp rent increases. As pointed out in the series, the new rents were more than the old tenants could bear, so most were forced out -- out of their homes and away from the churches and schools and neighbors they had known most of their lives.
What followed is apparent today in Trinidad and in other inner-city neighborhoods where these crimes took place: deterioration, foreclosed and abandoned buildings and, in some cases, drug havens.
To make the scheme work, the city's rent-control law had to be evaded and, as it turns out, that was the easy part. Requests from the real estate speculators for exemptions from rent limits on their buildings under a loophole in the rent-control law were reportedly swiftly approved by the District's Rental Accommodations Office with little, if any, investigation. It is hard to comprehend how 2,000 apartment buildings in the neighborhoods of Trinidad, Anacostia, Congress Heights and Deanwood could fraudulently change hands, as alleged, without anyone in the Rental Accommodations Office getting even a little bit suspicious that wrongdoing might be afoot -- at least until federal agents armed with subpoenas for their records showed up on the doorsteps.
Even if you accept the burden-of-paperwork excuse used by the Rental Accommodations Office (it claims to process 15,000 documents annually without a computer), you are left wondering why other offices in the local government did not detect something. How could such massive displacement and distortion of property values in these inner-city communities occur without even a close second look by either the mayor or the city council?
Fortunately, the manipulators haven't slipped away. To date, at least 36 of them have been successfully prosecuted by the U.S. attorney's office, and more prosecutions may be on the way. Significantly, most of the accused avoided trials by pleading guilty. Equally significant, the violators were not just old real estate hands but included an administrator at the University of the District of Columbia and a District government employee who got a three-year sentence -- 32 months suspended -- was fined more than $34,000, and who now -- get this -- works for the government as an appraiser.
This whole sordid affair was uncovered by a tenacious and courageous temporary HUD employee, Sarah Lyon, who bird-dogged the investigation in the early days, overcoming bureaucratic obstacles and bringing it to a point at which even the top-level naysayers at HUD had to get on board. She deserves gratitude, and if, as reported in the series, she was blackballed for her work, she deserves an apology and an opportunity for reinstatement.