Florida Condo Lending Gone Wild - The Florida Condo Con

BankUnited recently filed a $34.9 million foreclosure suit against the developers of the Latitude Delray, a 47 unit condo/townhome project. Only nine of the units were ever sold for prices ranging from $450,000 to about $600,000. Think about that for a moment. Even if they sold all of the units at the high end that would have only come up to $28 million, about $7 million short of the money BankUnited gave the developers!

And here's the real rub. Where did the $35 million go? It didn't cost anywhere near that to develop this project, but with developers able to pay themselves and their friends and relatives whatever they wanted in fees and bonuses, it's obvious just how profitable the Condo Con was for developers from Miami to Seattle.

This is not a lone example. Corus Banks loaned out billions of dollars on condos that would be lucky to sell for 50% of what the developers pocketed. I have said for several years, that the loans did not make sense. If you've been on any of my conference calls, I put it like this:

1 - Developers were razzle-dazzling bankers with fancy projects that looked great on paper.

2 - The banks were courting developers to take their money.

3 - The developers took the cash and hired as many friends and family as they could find. The skim from these deals made the early days of Las Vegas look like child's play.

4 - The Banksters were happy because they were earning bonsues based on making deals, even if they were bad deals. The Glickman family at Corus Banks are perfect examples of how the game was played at the top.

5 - Once the units were built, the developers didn't care if the projects failed, because they had already skimmed their money, and the Banksters didn't care because it wasn't there money that they were loaning out. The losers are you, me and taxpayers that will be paying for this circle of fraud for the next 10, 20 maybe 30 years.

By the way, BankUnited went belly up and was seized on May 21, 2009 by the FDIC. The developers got fat and happy. The execs at BankUnited got fat and happy. And we get stuck with project worth 10-30% of what was loaned out on them. Even if the Latitude Delray project could sell out the remaining units today, the best they could hope for would be a total of $18 million on a project that gobbled up $35 million. This is just one small of example of what is yet to come as the Florida Condo Con unravels.


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