This bailout’s for Lennar


Why are the cash strapped City of San Francisco and State of California bailing out predatory subprime lender Lennar?

by Ann Garrison

At the close of 2008 and throughout 2009, Americans watched our federal government reward the reckless multinational financial sector with trillions of dollars for causing the worst hardship since the Great Depression.

San Franciscans and Californians joined in the agony but few understood that both San Francisco and California have come up with their own bailout for one of the major players in the meltdown, the South Florida based Lennar Corp., thanks to Proposition G, followed by state Sen. Mark Leno’s Senate Bill 792, which legalizes the transfer of 23 acres of pristine state parkland to Lennar.

Lennar is not just a big industrial homebuilder; Lennar is also a big home mortgage lender. Like D.R. Horton, Pulte and the rest of the big builders, Lennar has its own mortgage lending subsidiary, Universal American Mortgage Co. (UAMC), which makes loans to sell its own properties.

UAMC’s top competitors, according to Hoover’s, are Bank of America, D.R. Horton‘s DHI Mortgage, and Pulte Homes’ Pulte Mortgage.

During the years leading up to the subprime loan meltdown, home builder mortgage operations plied customers with incentives far beyond the common 1 percent for one month teaser rate.

On Oct. 13, 2006, Marketwatch reported, in “Home builders up ante to lure buyers”: “The NAHB (National Association of Home Builders) found 55 percent of companies were offering home-option items such as granite countertops and landscaping at no charge, up from 37 percent the prior year. About 43 percent were offering to pay the closing costs on the buyer’s previous home …

“Forty-four percent of builders were reducing home prices, 4 percent were including a new car with the home, and 5 percent were offering a free holiday trip.”

Marketwatch also quoted Lennar CEO Stuart Miller on the increasing use of incentives and price cuts and Lennar’s need to keep cash flowing, at whatever cost, even in October 2006.

Why? Because Lennar had overbuilt, way beyond new housing demand, and had to keep overlending to keep moving it.

Less than a year later, in “House of Cards,” published in the August 2007 Builder Online, John Caulfield described the pressure Lennar had put not only on borrowers, but also on UAMC managers:

“Another source, who worked 2 ½ years as a manager for one of Lennar’s UAMC offices in Nevada before she was laid off in October 2006, says the pressure to approve buyers for loans was ‘overwhelming.’ That pressure came directly from Lennar’s divisional president, ‘who told us the relationship between the builder and the mortgage company was “master and slave.”’ When this source says she got tougher about qualifying buyers, Lennar removed several communities from her loan office’s territory. When asked why Lennar would sanction its mortgage subsidiary to approve loans for buyers it knew would not be able to pay them, this source replies, ‘Lennar wasn’t thinking long term; it’s a publicly traded company that’s judged on how many homes it closes.’”

Never mind how many UAMC mortgages were bound to go bad. Never mind that the prices of Lennar properties, even after deep discounts, were artificially inflated by UAMC’s approval of buyers for more than they’d be able to pay.

Never mind that financially unsophisticated borrowers would eventually drain any and all resources that they and their families could earn or liquidate to keep up with negative amortization payments, interest rates adjusting upwards and/or balloon payments.

Never mind that these borrowers would be left trying to talk to distant “loan servicing” bureaucrats, who would have no memory or concern for the borrowers, or the negotiations that had led to the loans.

Never mind that the loan servicers would demand payment and/or threaten foreclosure but refuse to reveal the names of the new “lenders,” those who had bought their mortgages from UAMC on the secondary mortgage market, even though they, the new lenders, were the only ones who could have agreed to renegotiate loans.

Investment banks, the master subprime puppeteers

Much has been written and said about the Machiavellian machinations of investment banks like Deutschebank, Morgan Stanley and Goldman Sachs, who bought megamillion dollar bundles of loans from Lennar’s UAMC and all the other reckless builders and mortgage lenders, then turned them into securities that could be bought and sold speculatively, insured themselves against losses they well knew were coming and sold “pass through certificates,” a.k.a. income strips on securities that they themselves were selling short.

Pension funds and municipalities that bought income strips no longer producing income are still scrambling.

The results:

• a staggering upward transfer and concentration of wealth, long before the bailouts,

• global recession far worse than capitalism’s usual boom and bust cycles,

• hardship and despair from Australia, where mortgage and credit card debt now exceeds even that of Americans, to D.R. Congo, where the critical mining contract review was finally abandoned under World Bank, IMF and recession pressures,

• ongoing waves of foreclosures and layoffs and new tent cities and

• falling home values and property and income tax revenues.

Reagan redux

Throughout 2009, city, county and state legislatures battled over what to cut next – health, schools, arts or public transportation – as federal trillions flowed into financial industry coffers, all in the name of Reaganite trickle down economics.

And nobody knows where it went, only that it hasn’t trickled down.

Lennar and the other overbuilders and lenders stepped up for another $33 billion handout within the Worker, Homeownership and Business Assistance Act of 2009, which became law on Nov. 6, 2009, prompting New York Times financial columnist Gretchen Morgenson to ask, “Would it be so terrible if some builders that lost their heads during the housing mania ceased to exist?”

Lennar, the most aggressive overbuilder/lender, spent $240,000 lobbying for its $250,000,000 share, proving yet again that politicians offer an astounding return on investment; that’s a 1,041.66 percent return for Lennar on this one.

Et tu, San Francisco? Et tu, California?

At the San Francisco City and County Board of Supervisors, in the San Francisco Bay View and on the phone to Mark Leno and other Sacramento legislators, I keep asking why cash strapped San Francisco and California are rewarding Lennar/UAMC for all this and urging them on with more “public private partnerships” and “title transfers,” a.k.a. land grabs, including 23 acres of pristine waterfront parkland at Candlestick Point?

This corporation has not changed its ways.

When foreclosed properties flooded the market, competing with its new properties, it launched an ongoing ad blitz to “buy new,” asking, “Why take the risk and buy a used foreclosed home or a short sale when you can afford a brand new one?

Indeed. Especially if it’s a foreclosed Lennar Home, quite likely built with toxic Chinese drywall or on top of a bomb test range with live ordinance still underground or any number of the other toxic dumpsites Lennar specializes in building on, like San Francisco’s Hunters Point Naval Shipyard, the hugely contaminated home of the now shuttered Naval Radiological Defense Laboratory.

Lennar’s marketing team even produced a classic video argument for exhausting the planet’s resources, “Why buy new?” Watch it below.

Last spring Lennar’s Southeast Florida division announced a weekend sale, “THIS BAILOUT’S FOR YOU”:


“MIAMI, Fla. – Corporations should not be the only ones benefiting from bailouts. This weekend April 18 and 19, the Southeast Florida division of Lennar, one of the nation’s leading homebuilders, is bailing prospective homebuyers out with incredible prices, incentives and interest rates that make it simple to buy a new home in today’s current real estate market.”

As with the war, if we can’t stop it here, locally, I don’t know where we can.

San Francisco writer Ann Garrison writes for the San Francisco Bay View,, Digital Journal, OpEdNews, Global Research, Colored Opinions and her new blog, She is also active in international Green Party organizing, with special focus on supporting the Democratic Green Party of Rwanda, which is struggling for official recognition and a free and fair election in Rwanda in August 2010. She can be reached at


  1. that ad was catchy: new, New! NEW!!!

    I think the answer to your question though is that Lennar is sub-divided so that the Hunter’s Point site is a different corporation, than even the Treasure Island corporation which again is different than the various other projects across the country.
    I think that the contracts are structured so that Lennar in Hunter’s Point could go bankrupt and the city would then have to deal with finding another firm to take over the largest building project its ever engaged in, when no building firms are initiating new projects, let alone taking over spoiled ones.
    So the city is keeping the project afloat, continuing to sweeten the deal, giving Lennar what they ask for, to believe their accounting, to believe their projections, and to bend to each of their demands for cost reduction and for the city to take over expenses.

    What will happen to the Hunter’s point project if the 49s move to Santa Clara as looks increasingly likely?
    What happened tot he plan that the communnity invested ten years in developing that was scuttled when the niners announced their intention to shop for another city?

    An activist friend told me that 15 years ago a major effort to organize the shipyard and candlestick into a cooperative housing and commercial district, owned by the residents, developed a well reasoned plan but failed to get enough local supporters.

    During economic times like these, cooperative agreements, based in land trusts and credit unions, offer real alternatives to vacant lots, if say, Lennar at Hunter’s Point actually was forced out.

    I’m not saying that’s about to happen. My sense is that the shell game of corporate financing allows them to pay as little as possible, always appearing on the edge of solvency, but able to get loans or contracts from other arms of the parent corporation when necessary.

    thanks for the research.

  2. Thank you, Lil’ Neil. Very acute answer to “Et tu, San Francisco?”

    You think that the City/RDA main motivation now is keeping Lennar’s little subdivided projects from going down on its hands? That right?

    Would that really be worse than the finished projects, including condos on state parkland? (Much of which may be submerged by global warming.)

    I agree about the shell game that keeps making it look like Lennar’s solvent. As I said, gotta keep the cash and property moving, as the “old” stuff–3,4,5, or so years old–is abandoned to foreclosure, probably bulldozed into the landfill. In “American Casino,” you can see the swimming pools full of consumer crap, mosquitos, snakes, and rats already causing a health hazard, around Stockton, one of the worst overbuilt, oversold, over mortgaged, and then foreclosed upon disasters. And it goes on. (This bailout’s for you!!!)

    I thought the 49ers move to Santa Clara was just a matter of time, so I’m not sure what to say to that.

    But I’d like to see some sort of coalition with a coherent alternative vision, an alternative to the RDA, about land use and “development” emerge in time for the 2010 Supes election and 2011 Mayor’s election. The RDA should be dissolved; the Board should become the RDA, so to speak, so that we can have an actual dialogue with elected officials instead of with the Board via obscure, corrupt, RDA bureaucracy about this.

    Lots of people have pointed out that BVHP doesn’t have a housing problem; it has an income problem, but the City has a housing problem too–meaning more people working here than are able to live here.

    These mega developments have been presented as a solution to both the housing and the income problem—to the income problem as another form of trickle down economics, trickle down through a huge corporate predator that instead helped bring on the hardest hard times since the 1930s, and a huge income transfer up, to the investment banks which are still putting the screws to all the people hooked into Lennar’s predatory loans.

    You, Neil, or anyone else out there see hope of a coalition emerging with a coherent vision around land use and the employment issues that the RDA hijacked emerge before this year’s Supes election?

    That coalition may exist—it may be P.O.W.E.R., or something that should be built around P.O.W.E.R., the Greens, the Milk Club. . . ??? I may simply need to know about it.

  3. The more exposure on Lennar’s business practices that come to light will signal a shift in this developers business outlook that have cost many communities millions if not billions of dollars across the country in lawsuits etc. They were convicted of building on their own toxic dumps, in their home state of Florida. To their most recent exposure using toxic Chinese drywall pictured in Annie’s article. On the other hand what was the cost of their ties to Lehman Brothers?
    What did it cost us overall? Was it millions, billions or trillions? Did they actually develop jobs for the U.S or truly take them away you are the judge.
    Thanks Annie

  4. Lennar has NOT created jobs. Of course they’ve employed a few San Franciscans, including Kofi Bonner and RDA bureaucrats, but, in the City as a whole, and, the rest of California, the nation, and beyond, Lennar’s recklessness and greed has created joblessness, homelessness, and despair. Lots of it.

    Neither Lennar nor the RDA are about creating jobs, or community–anything but–and it’s time City government and the RDA admitted that.

    One of the ugly ironies in all this is that Lennar’s all but done itself in, in the process of doing so many others in. Without ongoing bailouts at all levels, and more reckless lending on more commuter developments that never should have been built, lots more of Lennar’s own employees will be outa work too.

    The big investment banks saw all this coming and figured out how to manipulate Lennar, other reckless builder/lenders, AIG, municipal and pension fund managers, and, the federal government, to hugely concentrate cash in their own coffers.

    (And BTY, Laurence Pelosi moved over to become a V.P. at investment bank Morgan Stanley, no doubt taking plenty of insider info about how to best take advantage of Lennar’s precarious position. HIgh finance is as dog eat dog as any urban jungle, and the stakes are, of course, much higher.)

    But, Lennar can cry me a river. As the NY Times’s Gretchen Morgenson said, ““Would it be so terrible if some builders that lost their heads during the housing mania ceased to exist?”

    NOOOOO!!! Let ’em go; Lennar, Pulte, D.R. Horton, Beazer Homes and all the rest. They’re causing joblessness and homelessness, trashing the planet, and even destroying themselves, barring federal help, as they go. That last federal $250 million, handed to Lennar, once again in the name of trickle down economics, could’ve kept a lot of former Lennar homeowners out of tent cities. A small share would have gone a long way in Bayview Hunters Point.

    But, to finish on a more positive note, let’s reconsider the all important jobs issue that Maurice raised, in relation to the alternative, cooperative vision that Neil suggested–his vision of credit unions, land trusts, cooperative housing and work. (Did I hear urban farms? Permaculture? Maybe even urban energy co-ops? Why not?)

    Jobs for the sake of jobs, rather than social value, is not a sustainable goal, but, the reality is that JOBS = SURVIVAL, in the world as we know it, so, in that sense, we need jobs.

    What we really need is sustainable practice, but for now the argument for survival is still framed as an argument for jobs.

    We need a local coalition that challenges the argument for jobs with an argument for sustainable practice, including sustainable land use, justice, and social cooperation.

    And, of course, we need to cancel the annual Blue Angels military recruitment fest, because the war(s) is draining us all, materially, spiritually, and morally, and trashing the planet even faster than Lennar.

  5. Thanks Annie,

    Personally, I’d like to see something more akin to what they have in Alameda, where the Mayor and the City Council members are a combination of our Mayor, BOS, Redevelopment and even the now defunct Restoration Advisory Board, (I got my official notification from the Navy yesterday that it has been officially dissolved), all rolled into one.

    Doubt we could have anything like that here, but the engaged spirit of it intrigues me.

    Wresting the power away from Redevelopment into the BOS is a monumental challenge. I’d have to honestly look at that more closely before rendering a decision, but as I’ve said, there was something marvelous about appearing before the Alameda City Council and seeing how engaged, vested and knowledgeable they were when it came to Mare Island, Alameda, Treasure Island, the Navy and the development process.

    Keep you posted,


  6. Ann,
    Nice review of the facts.
    It is obvious from the recent financial hearings that the games is not fair to all. It is apparent that our system is controlled by money and that money can buy favors. The banking system based on fiat money is there for those who can pay to play. This serves as a good example of pay to play and the favors money can buy. With the $millions in hand these people may buy who and what they want. The system needs some repair. The poor ethics and business practices that got us here seem to be keeping us here. The system needs repaired. The oversight needs accountibility.
    Our community has been devasatated by over valued appraisals with loans made by the builder who hires the lender to make loans regardless of the ability to pay the loan back. all in the name of profits. They pass all responsibility down the line and have no recourse for the ill deeds done.

    Brian Davies

  7. If your deal with them is for negotiating cash paffyos and then getting the negative report off your rating, then it’s good if the company is legit and you aren’t paying huge fees (because you can do this yourself).If they are claiming to get rid of the dings without paying at least part of them off, it’s probably a scam and you can easily do this yourself. I hired one years ago. I don’t know HOW they did it, but all my bad credit went away, at least temporarily. I think they did something shady and probably illegal.

  8. I think that the contracts are structured so that Lennar in Hunter’s Point could go bankrupt and the city would then have to deal with finding another firm to take over the largest building project its ever engaged in, when no building firms are initiating new projects, let alone taking over spoiled ones.

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