Two Minnesotans and two Wisconsin residents face racketeering charges in a complex multimillion-dollar mortgage scam-one that Hennepin County Attorney Michael Freeman said is part of "the second wave" in mortgage fraud schemes.
Unlike most mortgage schemes in recent years that involved mostly subprime lenders who required minimal verification of a home buyer's financial state, this scheme targeted homes in foreclosure and took advantage of provisions of Minnesota foreclosure law. It took place between June 2009 and August 2010 and allegedly relied on an intricate web of at least seven fictional employers, plus false documents including bogus bank statements and pay stubs, forged college transcripts, and counterfeit court documents. The documents were used to qualify "straw buyers" for mortgage loans that were guaranteed by the Federal Housing Administration (FHA); such loans require extensive documentation.
The defendants are James Darrell Ober and Wendy L. Ober of Hudson Wisconsin; Raul Burgos Pliego of Farmington; and Alejandro Sanchez (also known as Silverio Alejandro Sanchez Cruz) of Bloomington.
According to a criminal complaint filed in Hennepin County District Court, Franklin American Mortgage Corporation determined through an internal review that it issued nearly $10 million in FHA-insured mortgage loans to the four defendants for the purchase of about 65 Minnesota properties. They allegedly collected loan origination fees of $7,000 to $8,000 per transaction and kickbacks ranging from $63,000 to $157,000 for each-or more than $840,000 total.
But there are suspected to be additional lenders. The U.S. Department of Housing and Urban Development estimates that the defendants' mortgage brokerage originated about $23 million in loans that were used to buy 136 properties throughout the Twin Cities and Greater Minnesota.
"Unfortunately, we think that this could be the second wave of criminal activity resulting from the housing crisis," Freeman said in a statement. "First we had the criminals who committed frauds in the middle part of the decade that contributed to many homeowners losing their homes through foreclosure. 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 the taxpayers."
Because the Obers and their principal business, Mortgage Planners, Inc., focused on properties that were in foreclosure due to the collapse of the housing bubble, many of them are likely to go into foreclosure for a second time in less than five years, according to the Hennepin County Attorney's Office.
The defendants face up to 20 years in prison and a $1 million fine if convicted.