Alleged Fraud for Profit Mortgage Scheme in Southern Metro

by Alex Stenback on September 6, 2007

Fresh evidence from the Star-Tribune today that we have a much larger fraud-for-profit mortgage problem in the Twin Cities than many care to imagine.

Authorities revealed in federal court Wednesday that they are
investigating allegations of a mortgage fraud conspiracy involving
about 200 houses in several southern Twin Cities suburbs…The government estimates losses of more than $50 million.

To this point, the standard media script on mortgage fraud has mostly centered around individual homeowners who were preyed upon by unscrupulous lenders, put into homes or mortgages they had no hope of ever repaying, and had their lives turned upside down by the experience.

Though these stories pass for decent journalism in a "little guy screwed by the big guy" sort of way, and have gotten plenty of attention in the press and from the legislature, we’ve felt for a while that they are just the tip of the iceberg, and that the bulk of mortgage and real estate fraud in the Twin Cities has been perpetrated by organized groups of individual "property investors" tied to all aspects of a real estate transaction.

We fully expect to see more operations of this sort exposed in the coming months.
Alleged Mortgage Conspiracy Led to $50 Million in Losses [Strib]
From Bought to Rented to Foreclosed [Strib]

{ 3 comments… read them below or add one }

Aaron Dickinson - Edina Realty September 6, 2007 at 4:27 pm

I read that too and was thinking the same things. The part that wasn’t mentioned though is that there was another party in this that should have known better… the title company.

You can’t tell me that the title company wasn’t in on this whole thing too. I’d argue when you have a buyer, builder, title company and loan officer all working together to defraud a lender, that it is a conspiracy and should be nailed by the RICO Act. See:

Of course, I am not a lawyer but these people are doing a great job of screwing up everyone else’s lives for their gain.

Chuck September 7, 2007 at 9:58 am

This Star Tribune article might clarify the questions you posed in your 01 May 2007 entry:

Minnesota 3rd in 2006 Sales Volume?!?! Yeah, uh huh… how much of that was to “straw buyers” of $500,000 homes like this?!

AL September 9, 2007 at 7:25 am

I thought mortgage fraud was only commited by brokers!

Our state legislators exempted banks from recent legislation.
This US Bank connection will not get much play but it should!

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