Mortgage Laundering

We have all heard of "money laundering" -- how crooks take dirty money obtained from crimes and try to clean it by moving it through legitimate businesses.  What about "mortgage laundering" -- taking bad mortgages and funneling them through legitimate investments?  Well, that is exactly what happened during the mortgage meltdown of 2007-2008.  Here are a few examples from Cleveland, Ohio.

The abandoned and stripped house pictured above, in the Slavic Village neighborhood of Cleveland, had a mortgage that was part of the Goldman Sachs synthetic CDO, ABACUS 2007-AC1. It was this synthetic CDO that the Securities and Exchange Commission took Goldman Sachs to court on. This home was also one of the properties that mortgage broker Mark Kellogg was convicted on.  In 2008, the house was foreclosed upon, and still sits abandoned today. At least the ivy devouring the south side of the building seems happy.  

See how the failed mortgage from this home was embedded in the ABACUS CDO in the network map below.

We have been "connecting the dots" since 2001. First, was the terrorist network of 9-11 hijackers. A very interesting and innovative project was done by one of our clients -- uncloaking a slumlord conspiracy. Finally, we can share a few other examples: corruption in local government, political influence via indirect quid-pro-quo and financial flows.


The movement of other bad Cleveland mortgages to AAA-rated investments is pictured below -- the relentless march from Main Street to Wall Street.

P.S.  Almost 10 years later, the mortgage meltdown still cripples Cleveland.


Thank you Silvija Krebs for research & data discovery in public real estate data bases!