January 26, 2012
/24-7PressRelease/ -- Minnesota Mortgage Fraud Schemes Result in Several Crackdowns
A recent spate of convictions and guilty pleas stemming from million-dollar mortgage fraud schemes perpetrated during the housing boom of the mid-2000s has shed light on fraudulent real estate practices in Minnesota.
Four brokers have pled guilty to a mortgage fraud scheme involving Cloud 9 Sky Flats in Minnetonka, Minnesota. From 2006-2008, these brokers submitted false information to obtain loans for buyers and helped with down payments. One broker has accused the St. Paul Developer JLT Group, Inc., and owner Jerry Trooien, of encouraging the scheme, but he has denied any involvement. Trooien recently underwent Chapter 11 bankruptcy proceedings.
The last broker to plead guilty was Lindsay Loyear, who secretly helped buyers finance their down payments, lied about the value of the property to the lender, and then received kickbacks at about 30 percent of the financed prices. Loyear used this scheme in three properties at Cloud 9. However, overall the scheme involved many brokers and included 100 condo units in various locations with total loans in excess of $8 million.
Unfortunately, this is not the only mortgage fraud scheme that was recently discovered. In September of 2011, the Enforcement Division at the Minnesota Department of Commerce investigated the illegal activities of Split Rock Realty, which would receive a fee of between $25,000 and $70,000 from a co-conspirator title company, keep $1,457 and "kickback" the rest of the fee to the buyer, thus defrauding lenders.
The federal Real Estate Settlement Procedures Act, or RESPA, prohibits kickbacks, fee-splitting, and brokers, agents and others from charging for unearned fees, with fines and jail time possible consequences of a violation.
Avoiding Mortgage Fraud Schemes
The FBI suggests several methods to help potential real estate buyers avoid mortgage fraud of all types, including kickback schemes like those perpetrated above:
-Use referrals when purchasing a new home and check whether the brokers, agents or applicable professionals are fully licensed and in good standing with their respective organizations.
-Be aware of what similar homes in the area are selling for to avoid having the broker inflate the actual price of the home.
-While they are much more difficult to obtain now than during the housing boom, no money down loans do still exist: avoid them in almost all circumstances.
-Do not lie on any loan application documents; this includes inflating your income or hiding where the money is coming from (in the schemes above, the buyers all received money from the agent). Lying on a mortgage application can result in far-reaching negative consequences for the buyer, not just the broker or agent.
-Watch out for any blank lines on documents; refuse to sign any forms that are not completed.
Buying a home or business space is an exciting event, but one that is stressful and fraught with potential difficulties. If you are looking to purchase residential or commercial real estate, speak with an experienced real estate attorney to ensure that all documentation is properly executed and your interests are protected.
Article provided by Thomsen Nybeck, P.A.
Visit us at http://www.tn-law.com
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