James and Wendy Ober, Hudson, Wisconsin, Raul Burgos Pliego, Farmington, Minnesota, and Alejandro (Alex) Sanchez aka Silverio Alejandro Sanchez Cruz, Bloomington, Minnesota, were charged with racketeering in a scheme that lasted from about June 2009 through August 2010 and resulted in at least $10 million worth of Federal Housing Administration – insured mortgages used to purchase at least 65 properties in the Twin Cities Metropolitan area and greater Minnesota, according to the complaint.
The Obers and their principal business, Mortgage Planners, Inc., concentrated on properties that already were in foreclosure due to the collapse of the housing bubble. So, many of these properties are likely to go into foreclosure for a second time in less than five years.
According to the charges filed in Hennepin County District Court, the scheme had several parts:
When a property is sold at a sheriff’s auction, the bank holding the mortgage usually wins the bid and it is well below the cost of the original mortgage and well below the current value of the property. The Obers knew something most property owners don’t know, which is, in order to keep the property, a property owner need only pay the price of the winning bid, creating instant equity;
The Obers took on partners who were straw-buyers who had no intention of actually owning the house. However, in order to get the FHA-insured mortgage, the Obers provided the straw-buyers with fake job histories, and created false documents showing the straw-buyers as having gone to the University of Minnesota or other colleges and forged judges’ signatures on phony divorces;
The Obers lied on the loan documents and ran some of the properties as rental units, which is illegal under the terms of the mortgage;
Finally, the Obers created sham junior mortgages on the homes, which were dated before the houses went into foreclosure but not filed until after the sheriff’s sale so they would know how much equity was in the home. That allowed the Obers to receive that equity immediately and if the homeowners didn’t redeem the main mortgage, the Obers could own the property by just paying the sheriff’s sale price.
The Hennepin County Attorney’s Office filed charges as part of an investigation by the Minnesota Department of Commerce and the U.S. Department of Housing and Urban Development against a Hudson couple and their associates.
“Unfortunately, we think that this could be the second wave of criminal activity resulting from the housing crisis,” Hennepin County Attorney Michael Freeman said. “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.”