Fraud w "straw buyers"

Alleged mortgage conspiracy led to $50 million in losses

Excerpts:

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 investigation is tied to a rash of foreclosures in New Prague and New Market, and possibly other suburbs, and some people who were renting the houses have been evicted. The government estimates losses of more than $50 million.

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The foreclosures are rooted in the sale of homes by Eagan builder Parish Marketing and Development to a small group of investors, according to the company's attorney. Loan documents were allegedly falsified to make the buyers appear as if they qualified for the mortgages when they did not.

When the housing market collapsed this year, those so-called "straw buyers" were unable to resell the properties, which ranged in price from $300,000 to $500,000. In some cases, the buyers managed to rent out the houses, but often the rental payments were not enough to cover the mortgages.

"All of a sudden, the pool of potential buyers who could take the mortgages off their hands significantly decreased," said Ryan Pacyga, the attorney for Parish Marketing. It left Parish Marketing and the investors with "overwhelming obligations."

A 30-year-old loan officer for U.S. Bank pleaded guilty Wednesday in federal court in Minneapolis to one count of conspiring to commit mail fraud in connection with the alleged mortgage fraud.

Ramiz Yousef Saadeh of Apple Valley worked for U.S. Bank until last month. Saadeh said that at the direction of a homebuilder identified in court only as "Company A," he provided mortgage brokers with falsified financial data from 2004 through May of this year. The information was used so that "straw purchasers" could obtain loans under false pretenses to buy the homebuilder's properties.

Comment: There needs to be more oversight of the mortgage industry. If the industry cannot regulate itself, the government will step in! Image is from the Star Tribune article.