Prosecutors on Wednesday charged two Twin Cities men and a Hudson, Wis. couple with racketeering in an alleged mortgage fraud scheme that started in 2009.
Prosecutors charged James and Wendy Ober of Hudson, Wis. of doing business as Mortgage Planners, Inc. The two others named are Raul Burgos Pliego of Farmington and Alejandro Sanchez, formerly of Bloomington.
Minnesota Commerce Commissioner Mike Rothman said investigators in his office first suspected fraud when they found forged documents in mortgage loan applications. Rothman said in addition to criminal charges, the four face civil action to revoke their licenses and recover money.
"We've also brought charges today to civilly prosecute licenses of these individuals so they will no longer be able to do any real estate transactions in the state of Minnesota nor to use their companies again the future," Rothman said.
Hennepin County Attorney Mike Freeman said the four bought at least 65 Twin Cities properties.
State and Hennepin County officials allege the four carried out their fraud in this fashion:
• Foreclosed homes were purchased at sheriff's sales where the amount of sale is often well below the actual worth of the home.
• The Obers recruited people to pose as buyers who had no intention of of owning the property. The straw buyers were supplied with fake histories of college classes and other forged documents establishing their false identity.
• The Obers then lied on loan documents and rented some of the properties, not allowed by the terms of the mortgage.
• The Obers created sham junior mortgages on the homes, dated before the houses went into foreclosure but not filed at the time of foreclosure to establish the amount of equity in the property, allowing the Obers to receive the equity immediately after the sheriff's sale.
Freeman, whose office is prosecuting the alleged fraud, said the scheme is what he calls the second wave of criminal activity growing out of the foreclosure crisis.
"First we had the criminals who committed frauds," with mortgages that carried a high risk of failure for the borrowers, said Freeman. "Now we have a scam that specifically targets those properties that went into foreclosure."