Straw buyers picking up foreclosed houses are being used by scammers to dupe lenders. It is a new wave of a new type of sophisticated fraud. Two residents of Minnesota and two residents of Wisconsin are facing criminal charges for complicated mortgage scam involving millions of dollars said attorney of Hennepin County, Michael Freeman.
Unlike other scams of recent years his one related to sub-prime lenders where the minimum verification was required to know about the standing of the loan taker. It focused on houses in foreclosure taking advantage of foreclosure law of Minnesota.
The scams took place from 2009 June till 2010 August when a complex net was cast involving seven employers that did not exist – were fictional. False documents including forged bank statements and pay slips were produced; even forged court documents came into play. These documents were used to make eligible straw buyers for taking housing loans from banks that had the guarantee of Federal Housing Administration or FHA. These types of loans needed meticulous documentation.
The names of the accused were James Darrell Ober, Wendy L. Ober, Raul Burgos Pliego and Alejandro Sanchez. As per the complaint lodged in the District Court of Hennepin County, through an internal review, Franklin American Mortgage Corporation found that it had granted FHA insurance backed loans worth $10 million for the buying of 65 properties in Minnesota. Per transaction loan origination fees ranging from $7,000 to $8,000 were collected. Kickbacks for each ranged from $63,000 to $157,000 for each; it totaled up to $840,000.
There are suspicions that other lenders are also involved. According to the estimate of HUD the mortgage brokerage of the defendants resulted in the origination of loans worth $23 million. This money was used for buying 136 houses across Greater Minnesota and the Twin Cities.
Freeman said, “Unfortunately we think this could be the second wave of criminal activity resulting from the housing crisis … Now we have a scam that specifically targets those properties that went into foreclosure. But we stand ready to prosecute white-collar criminals who are taking money from private businesses and taxpayers”.
The firm of the fraudsters, Mortgage Planners, targeted those houses that had gone into foreclosure because of the bursting of the bubble; there was the possibility that these would slip into foreclosure again within another five years according to the office of the attorney of Hennepin County.
If convicted the accused could be jailed for 20 years and pay fine of $1 million.