Stealing public housing money: a reported historical method
A 1988 American book on journalism mentions the following:
One of the biggest property scandals in American history was unearthed in the early 1970s by two reporters for the Philadelphia Enquirer, James Steele and Donald Barlett. After spending two months pouring over hundreds of warranty and mortgage deeds, Steele and Barlett found the schemes worked something like this: A real estate dealer would buy a dilapidated house in a slum neighbourhood for $2500, then resell it to a poor family for $10,000. Because the house wasn't worth $10,000, no bank would give the family a mortgage. But the real estate dealer had a crooked friend who worked for the Federal Housing Administration. The FHA's job is to insure mortgages - that is, to guarantee to the bank or other mortgage lender to pay back the amount of the mortgage if the family defaults. The crooked FHA official, accordingly, would pledge on behalf of the federal government to insure the whole $10,000, whereupon the bank would agree to lend the family the money with which to buy the house from the crooked real estate dealer. The house was usually in such bad shape that it would start falling apart almost before the first mortgage payment came due. With no money to make repairs, the family ended up defaulting on the mortgage and abandoning the building. The bank then would go to the federal government to be reimbursed for the $10,000. The federal government got stuck with the house, which was worth only $2500 and which, in most cases, the city would have declared unfit for human habitation. The scheme was repeated in city after city across the country. By the time the press broke the story, the government had lost an estimated $200 million.
Page 288, The Practice of Journalism a guide to reporting and writing the news by Bruce Porter and Timothy Ferris, Prentice Hall, 1988.
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