A flurry of Twin Cities mortgage fraud prosecutions

The enforcers are turning up the heat on mortgage foreclosure scammers.

The latest is the announcement by the feds, the state and Hennepin County charging four people.


Minnesota Department of Commerce Commissioner Mike Rothman is flanked by Barry McLaughlin, on the left, a HUD special investigative agent, and Hennepin County Attorney Mike Freeman on the right.

They laid out for reporters Tuesday their allegations that a Hudson, Wisconsin couple and a couple of Twin Cities guys went to some unusual lengths to steal mortgage money.

The charge is that the four made a batch of bogus documents including college transcripts, employment records, even a divorce decree signed by an honest-to-goodness Twin Cities judge whose John Hancock, the investigators allege, was forged.

There’s much more.

The four allegedly recruited people to pose as buyers of 65 foreclosed Twin Cities homes, then the alleged scammers used the fake documents to win federally-insured FHA mortgages.

And walked away with cash from mortgages totaling $10 million.

They face racketeering charges because they conspired with each other.

That’s a heavy wrap if convicted – up to 20 years in prison and a $1 million fine per person.

That’s not all.

The Commerce Department will chase the four in civil action to revoke their various licenses to ever do business again in Minnesota, and will also seek some money.

Authorities say this is the latest wrinkle in the frantic mess caused by the financial crisis, the mortgage meltdown, the foreclosure crisis – you choose the term.

This comes on the heals of a batch of other developments.

Two fraudsters were convicted last week of racketeering in a big Hennepin County mortgage fraud scheme involving 133 homes and about $20 million in losses to lenders (Yes, I know, the idea of banks losing money doesn’t generate a lot of sympathy given their profits. Just bear in mind, those losses likely end up somehow costing bank stockholders…who are very likely people including you and me whose retirement or pension fund portfolios include bank stocks).

This week at the federal level, the enforcers who went after J.P. Morgan Chase and RBS for misstating the risk of investments based on mortgages had a partial victory. J.P. Morgan Chase threw in the towel for its part, and is coughing up more than $150 million to settle.

The Cities readers no doubt have much more financial savvy than yours truly and realize that while $150 million sounds like a lot, it is literally a single digit percent of that company’s net worth.

Ok, this has gone on way too long.

The point, and I do have one, is there’s still lots of action out there among enforcers to try to bring a measure of justice to those who may have accrued ill-gotten gains from the financial crisis.

Sadly, to some, the enforcers are not at the moment snaring many big fish at the national level on criminal charges. Mostly fines.

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