DiscoverRevealAfter the bubble burst

After the bubble burst

Update: 2017-06-10


America’s housing bust created both winners and losers – and homeowners have been the biggest losers. Last year, the rate of homeownership in the U.S. hit its lowest point since the 1960s.

So who are the winners? This episode of Reveal takes you into the world of people who are still profiting, from rent-to-own investors in Detroit to President Donald Trump’s best friend, a real estate mogul.

Head over to for more of our reporting.

Follow us on Facebook at and on Twitter @reveal.

And to see some of what you’re hearing, we’re also on Instagram @revealnews.

Following script is auto-generated by Speech to Text Technology:

from the Center for investigative reporting in PR X This is reveal a mallet and here we are at P O chill Ranch which is the intersection a couple of our families passions poll on and wine on the other this is Tom Baer in a promotional video for his winery outside of Santa Barbara California another time she will say What is the connection between ho and wine and there are several but the most important one is stewardship the winery is back side is his real money comes from real estate has been a lot of time talking about him this hour in part because he's one of Donald Trump's old is close friends in all the ways that Trump is the quintessential New York billionaire Barry is all that family he pals around Hollywood Stars champion surfers would Trump drinks diet coke beer takes pride in his family's fine line Derek's Porto was served to Trump's inauguration in fact big planned the whole inauguration he raised more than one hundred million For cutie is at the Lincoln Memorial the night before truck to the oath of office welcome the forty fifth president of United States down from the in the video you can see trouble putting his hand on their children they really close the thank you very much everybody and thank you Tom reveals airing blitz has been looking into beer he joins me now so Erin how these two guys actually me they met back in the nineteen eighties Tom Barrack was working for this Texas developer and he helped Donald Trump by the Plaza Hotel in New York and remember back when Donald Trump being president seem totally absurd to most people and nobody in the Republican Party would give him the time of day and nobody would endorse him Tom Barrick endorsed and he started raising money for him and he raced twenty two million dollars for one hour from super PACs and now that Donald Trump as president they have lunch together at the White House bear told CNN they talk every day and the New York Times says he's one of the few people that don't from tress so it sounds like the pretty type A Bear Good Witch in the first place Barrick is one of these investors who makes a lot of money profiting off of other people's pain he made his first big pile of money off of the Savings and loan crisis he profited off at dot com bust and when the Great recession happened he was there to make one of his biggest plays yet yet and this time he's making money off of the housing bust so it's been our own house really on home ownership last year hit its lowest level in fifty years by regular people have been struggling to keep their homes or save enough to buy one Barrick has just been winning and winning let me take you back to two thousand and five that year Fortune magazine called Tom Barrick the world's greatest real estate investor on the cover he smiling image of a gold house reflected in his aviator sunglasses was the height of the housing boom but Tom Barrett called fortune there was a bubble he saw the crash coming and he started cashing out on many of his real estate investments his close friend Donald Trump said he'd welcome the crash first of all I hope that happens because then people like me would go and buy that was recorded at Trump University seminar in two thousand and six if there is a bubble burst is a call that you know you can make a lot of money if you're a good cash position which I'm in a good cash position today then people like me would go and buy like crazy that's exactly what Barrick did after the bubble burst he founded a company that began buying thousands of foreclosed homes all over the country like this one on West sixty ninth Street in South Los Angeles the small Southern California bungalow with white aluminum siding behind a short mid okay Marcus Butler grew up in this house Becca Becca five a little garden he grew light tomato stuff like that tomatoes greens elected he would pick it from back there a need today the yard is overgrown with crab grass is not kept up to good basic skills for Marcus is parents bought the house in nineteen sixty three after they ate like millions of other African Americans left the Jim Crow South and by the nineteen nineties the house was all paid off but Marcus is father died and his mom developed dementia and she gambled in two thousand and seven she took out a giant five hundred forty four thousand dollars reverse mortgage that's when the bank pays you for the equity in your house a lot of retired people to supplement their income but it's really a law the money in the face of a sea of the money but I really listen to what they're planning to use the loan Marxist mother got came with an interest rate that tops out at seventeen percent the end when she died in two thousand twelve the family lost the home to foreclosure the person I wanted it passed the House on the I mean if I passed on how to pass on to my daughter I mean that's what we know that our gang were younger try to keep the house of the the the the the the bank that foreclosed it was run by Steve the the name he's now Donald treasury secretary the documents from Hyde showed the new Chase Bank was responsible for nearly of all reverse mortgage came after the housing bust after Newton's up the house sat empty for almost a year before it sold at auction for one hundred dollars Company was the buyer the firm thirty thousand single family ten states this is my investment philosophy Eric laid out his vision in a speech estate investors at a University of Chicago conference of the Great recession you or woman of when a jungle a new swing you fight and you buy and eventually if you're successful they're all swinging with you and then you've got to move to another jungle Eric became king of the jungle of American foreclosures and his company became a big time landlord by turning all those homes into rentals Eric even bragged about how cheap it was the redder said many of these houses for fifteen hundred dollars total managing them was easy he said even with the home spread out all over the country how can you manage them when they're everywhere well how to manage one is how the mass of dots how to match FedEx Kinko's until the crash this kind of company simply didn't exist of course there have always been landlords on single family homes but they were mostly mom and pop landlords and this kind of thing where one company owned and rented out thousands of single family homes in cities all over the country from Los Angeles to Miami it had never been done before the the the four months after barracks company bought Marcus is family home at auction a guy named Shaun Pruitt signed a lease for the bungalow and move Get the The The The The The Sun comes to the door a wisp of a man with limbs barely thicker than sticks it's the middle of the day he's wearing a t shirt and boxer shorts Shawn lives here with his partner and five dogs he tells me he use to own his own house to a small farm in Texas I had two donkeys for hands free goats five dogs and we were going to get into beekeeping but that never happened because Sean got sick his aides and lymphoma he sold his farm and moved to L A to be closer to the UCLA Medical Center that's how he ended up as a tenant with Eric's company as his landlord to call the tiny little hope of looking around the house it doesn't seem like barracks company has done any work the carpets frayed the kitchen linoleum is peeling outside France from a neighboring Palm Tree are tangled in the electrical wire Sean's lease makes fixing that his responsibility he says he can't afford it John pays about eighteen hundred dollars a month in rent it's gone up every year since he moved in you think you'd be praised and rewarded for paying your rent on time and not having any problems and all that said they raised her rent punish she basically for being a good tenant he'd like to move but doesn't have the money meantime his pantry stocked with Campbell soup in jiffy peanut butter donated from the local food bank after four rounds of chemo chance doctors have told him he probably only has a few months left and beyond helping at this point I'm just kind of a semi to basically die so the sun doing the job I sound so macabre but it's true you and Shawn is expecting another rate increase when his lease runs out in August he might not live the The Shaw and just what tens of thousands of people across the country really hope for the company Barrick found love Derek says it's no big deal to manage properties across state lines not everyone agrees they are going to be wholesome and absentee far removed out of state landlords when we come back we had to Georgia with the company owns six thousand holes in his raising billions of dollars off of them on Wall Street you listening to reveal from the Center for investigative reporting and PR six The call covering extremism in America to reveal every week I choose a topic that has caught my and put together the hate report a short bulletin we send out on Friday mornings I might take an in depth look at a breaking news story like a racist hate crime such as the recent stabbings in Portland OR and put together an analysis of a topic of interest in the world of hate in today's America you can sign website have to hate report sent to your inbox each week just going to reveal News dot org slash height the from the Center for investigative reporting in PR hacks this is revealed now lets the founder and executive chairman of colony Capital and real estate mogul Tom Barrett is one of Donald Trump's oldest and closest friends he introduced vodka at the Republican National Convention the aces this is a wow I have to tell you I feel like the anchovy on Eve aka Caesar salad I know you're salivating for that and you get to get it okay whatever that means clearly he is much better real estate in his ad introducing people so after the housing crash Eric scooped up tens of thousands of single family homes and turned them into rentals more than thirty thousand of them are controlled by a single company reveals Erin Grant has been investigating Ayer High out so what you tell me about how bare it operates he founded a company that's now called colony star would home's tenant snow is way point that's where the sun their rent checks but collecting rent is only one of the ways Barrick makes money I have three words for you mortgage back securities I yes I remember that term mortgage back securities complicated financial products that helped tank the economy in two thousand and eight right yet that's when banks were bundling all these home mortgages together and they were creating these financial products that were filled with crap and then after the crash Tom Barrett he was one of the people who got in on the ground floor in creating a whole new type of mortgage backed security one that was based on all the rental homes his company oh you remember that bungalow in Los Angeles that we are talking about earlier less than a year after barracks company bought it it was bundled along with more than three thousand other homes into this giant mortgage back security five hundred and fourteen million dollars funded by JPMorgan Chase to understand how that works you have to go three thousand miles away from that Los Angeles bungalow to Wall Street or the on the forty eighth floor of the World Trade Center in New York Brian Allen is examining barracks financial creation as a vice president at Morningstar Credit ratings Brian's job is to make sure the homes are worth what colony says they are and that the rents to tenants pay will be enough to make money for investors one of the indicators is if there's a tenant in the property if the property is reasonable we can make some assumption that it is in a habitable form and in good working condition Brian's only seen pictures of the homes in colonies mortgage backed securities that's because he uses what critics call drive by appraisals to estimate the value of each of the homes in the bundle Ryan relies on an outside company that hires real estate brokers instead of appraisers another Brian Brian grow is a managing director at Morningstar he feels good about the process there were pictures of every property and so we thought the process was was diligent but if this sounds fishy to you you're not alone earlier this year the FCC began investigating the company colony High or devalue the homes it's part of a wider look into these new mortgage back securities it's a sensitive topic because artificially inflated home prices helped cause the housing bust and the Great recession Brian Gross says don't worry there's a whole system of checks that will prevent that from happening again turns out that a broker is getting value building that broker in a scorecard we thought there's an incentive for the brokers to provide accurate valuations and it's not just how much the houses are worth Morningstar also looks at how fast the rent is going on in each of these homes the more the rent goes up the better for investors and the investors are happy today barracks company has created six of these mortgage backed securities County essentially took out a huge loan against the value of tens of thousands of its homes worth three point two billion dollars all was JPMorgan Chase Eric and his investors get the three point two billion dollars right now and all those colony tenants they're the ones paying back that debt little by little every month to JPMorgan Chase the So how are all those tenants fairy colony owns thousands of homes in camp in Miami and Southern California Houston Dallas Denver Orlando Las Vegas and Phoenix I went to their biggest market Atlanta Georgia where the company owns six thousand homes I went door to door visiting dozens of colony properties most of the homes are in the suburbs on tree lined streets in neighborhoods with good schools but inside many of them are falling apart their tenants told me about peeling tile collapse encounters and even a snake infestation at one house a young mother named Nikita Edwards came to the door she told me about what happened when her baby was just three months old right after her family moved an arm of a world in our bay in our ceiling fans filters from the ceiling of her big unit like a light fixture dispel in it the one debate where we where nobody got hurt but the house has been a disaster ever since they moved in six months ago so you'd know he your ceiling collapsed you're simply the refrigerator week yet at the same time you're going through all of this you're getting a stream of eviction notices on Monday at Mickey D's mom lives here too when they first moved in things were hectic they were late paying rent within weeks they got an eviction notice colony demanded the past due rent fifteen hundred eighty dollars and on top of that late fees court filing costs the fee for colonies lawyer and another fee to pay the person who serve them the eviction notice with all those fees they couldn't catch up and it became a cycle of late fees court costs and more eviction notices when each of the first six months they lived here they ended up paying about two hundred dollars extra each month on top of their rent I told the key to the colony her landlord was founded by Tom Barrett one of Donald Trump's oldest and closest friends he's at peace big guy with little people in his world so using the company's corporate filings with the SCC for that last year it made twenty six million dollars in fees and ten at claw backs that's when they take money away from tenants like keeping their security deposits last year researchers at the Federal Reserve found that in Fulton County in the heart of Atlanta corporate landlords were much more likely than mom and pop landlords to file eviction notices colony was the most aggressive in a single year the company moved to evict third of its tenants but they won't rent to tenants who have ever been evicted so colony essentially takes good tenants and a lot of cases turns them into bad once the the the the the uh I spent several days going to eviction court in Atlanta it's called dispossessed or a court here the the gallery is full of worried faces almost all of them black people who have taken time off work to try to save their home Michael Lucas is deputy director of the Atlanta Volunteer lawyers Foundation heel to write that report by the Federal Reserve Lucas says you just have to look at the courtroom to see that in Atlanta can still have many legal rights usual courtroom or if you watch this law shows on TV one side is for the plaintiff one side is for the defendants and you have some measure of balance there and in the county does possess record of three desks are taken up by the landlords attorneys it's very clear who they are and it is kind they have kind of such a presence that you get a sense they're running the show tense almost always lose because the law in Georgia gives almost all the rights to the landlord so the judges usually begin court by making a short speech urging tenants to go out into the hallway to try to negotiate an agreement with the landlords attorneys it's their last chance to avoid being thrown out on the street one day out in the hallway I meet up with Yvette Frazier she's clutching an eviction notice and trying desperately to reach her son Ron was out of town I am the you can own me some who still don't have a thank you the search the nerves come run as a staff sergeant in the Air Force he's been deployed out of state and its his name that's on the lease and all I can to get to swim so I can get is taking her out I was in my zone he's only twenty five was his first win of the video every thing is I'm the judge says that because of its name isn't on the lease he would be legally obligated to order them out right away unless you work something out with colonies lawyer Ray Nolan homes to them sit on a bench outside the courtroom door oh the fall wanted do know this lady wanted the money SEO can hear faint can't make an arrangement with you because you're not that the tenant but what I can do arm says the landlord to pay in state when we go in front of the judge he's gonna um it'll be trapped in motion mean that is a motion to strike saying that the defendant did not pee year but will give you the seven days to work out to pay in state since he's in military mere half when the lawyer says if that can pay and stay it sounds like she's trying to help but it could get a much better deal under federal law colony had to tell the judge her son is in the military and the judge has the power to stay the eviction for up to three months but since if that doesn't know this and doesn't have a lawyer she doesn't ask for it she agrees to take the first deal colonies lawyer offers and promises to pay back rent within seven days along with more than four hundred dollars in fees if she doesn't come up with the money colony can get the marshals the throw is that her son now they're going to the ultimate absentee far removed out of state landlord that generally speaking we see is quicker to evict we see that on the ground level again lawyer Michael Lucas who helped write that Federal Reserve study on evictions in Atlanta would actually be in the limited interest to wait until the middle of the month of in a month and get that written they won't have to go to the costs on a landlord of displacement instead they are a massive bureaucracy not unlike kind of the servicers of them of all the mortgages when that went bad and they're just making a decision on the fifth we evict or whatever it is the colony disputes the report about its high infection rate they say the Federal Reserve look that only a small portion of the homes they own and even their colony says they actually ended up kicking out just ten percent of their tenants go the company would agree to an interview they gave us a statement it said they pride themselves on being quote a responsible landlord that provides its residents with an exceptional living experience they said the company plays a critical role in the US economy by combining the benefits of homeownership with the mobility and convenience of renting we give colony a list of the homes in the story along with questions about their fees but they didn't respond they also didn't respond to our questions about mortgage backed securities and what about Tom Barrack I spent two months trying to schedule an interview with him I told his publicist I was willing to fly anywhere in the country to ask him questions about his real estate business and his relationship with Donald Trump the barracks publicists said he wouldn't be interviewed so I called the self out is so high Tom Barrack that this is Aaron glance reveal where a national radio program I'm recording this conversation here and I had to call my next going to look like he I understand that I started to ask them about colonies eviction rate but he hung up on me the and the the the while Derek was having lunch in Mexico the crew was hard at work in a mansion he's building in Los Angeles I drove up into the hills of Bel Air just a few miles from that run down bungalow on West sixty ninth Street up here a cement mixer is churning and behind a chain link fence I got a glimpse of calm barracks half built mansion when it's done it'll be seventy seven thousand square feet across nine acres will have three fountains two swimming pools a tennis court and ten bedrooms for the help of a gate house bigger than the bungalow there are rumors that he's building it for Atari share but Derek's name is the only one on the plans barracks already cashing out of the rental housing business early just like he did before the housing crash in two thousand eight he's taken his company public and they started selling off a stock in March he made a hundred twenty seven million in a single day the room that reveals airing glance Aaron just a few quick questions for you we talked about the fact that Barry can Trump are such good friends who all should we be keeping an eye on well Eric isn't the only guy Trump has surrounded himself with people who made a ton of money during the housing bust there's Trump Treasury secretary Steve Nugent whose bank foreclosed on so many people that he became known as the foreclosure king there Steve Schwartzman the chairman of Blackstone whose company owns even more homes in barracks he's head of a special economic advisory group that meets regularly with trumpet the White House and the vice chairman of that group Jamie Diamond the president and CEO of JPMorgan Chase they created all of colonies mortgage backed securities so it sounds like all these people as the president's ear what kind of things really pushing for it's pretty early to tell especially because Donald Trump hasn't laid out a comprehensive plan but within an hour of taking the oath of office his administration took a step that made home ownership more expensive for a million Americans and push out of reach entirely for others it reversing Obama rule that would have made mortgage is less expensive for a lot of working class people and another thing we do know is this If the homeownership rate stays where it is now at this really all of these bankers and private equity guys rooting Donald Trump stand to benefit and all the better for them if the housing market takes a really long time to recover from the hit track during the Great recession the sets reveals lists it turns out that just a week after we reached him in Mexico Barrick walked away from the rental company he found he sold off all the rest of his stock in Cali style wood homes and resigned from its board of trustees colony built its business on the new real estate scheme next we look in old scheme that kept black families from buying homes fifty years ago called a land contract and now they're making a comeback that's ahead on repeal from the Center for investigative reporting in PR this is revealed now let's Chicago nineteen fifty nine Ruby and Robert Lee YORK Looking to buy a house for themselves and their eight children York's did buy a house sorta get something called a land contract for two story gray stone house in a neighborhood called Lawndale Ruby and Robert Lee have both passed on to talk to their children Sandra and download York both grew up in the house we were just lie
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After the bubble burst

The Center for Investigative Reporting and PRX