Two South Bend Retirees Duped Into Flipping Scam, Class Action Lawsuit A Possibility

Two Indiana retirees, in separate cases, filed lawsuits against an alleged home flipping group, who operated a local Century 21 real estate brokerage franchise, in Saint Joseph County courts alleging mortgage fraud, according to a story reported at SouthBendTribune.com.

In the first case, the victim ended up owning twelve houses that were worth considerably less than wht he paid for them. A former office manager for the group engaged in the flipping deals came forward in this case and, in effect, acted as a whistleblower, as she filed an affidavit (details in the article) in the victim's lawsuit outlining exactly how the flipping operators conducted their activities. This case ultimately resulted in a confidential, out of court settlement, according to attorney Lee Korzan, who represented the victim.

In the second case, the victim was having trouble selling her home when she was approached by two members of the group with an offer to buy the house. The bottom line in this case was that the house became the subject of a "property flip" where the house was sold for more than double the asking price. Further, while the victim only received the lower price that she originally agreed to, she got stuck with an IRS 1099 form reflecting that she received the entire sale price of the "flip."

Because the victim in the second case learned that others have been similarly scammed by the same group, her South Bend attorney, Douglas Small, has reportedly indicated that he will be seeking class action status for his client's lawsuit (thereby enabling similarly situated victims to join the lawsuit). In this regard, Small may be seeking to have the court force the home flipping group to "provide him copies of all sales transactions they have handled, and he will use those documents to identify other potential victims."

The article also reports on the story of a third victim of the group, who ended up buying three homes worth less than they were worth.

Reportedly, the flipping operation involved:

• recruiting "investors" with satisfactory credit scores,
• phony appraisals,
• intimidating employees to have mortgages placed in their names,
• fabricating documents reflecting false incomes and "phantom" employers for those applying for the mortgage loans,
• fictitious repair invoices from home repair companies that existed only on paper,
• failing to provide the "investors" with copies of the closing documents,
• promises of help finding tenants paying enough rent to cover mortgage payments.

To read the entire story (which is loaded with details) and is Part 2 of a South Bend Tribune story I posted on yesterday, see:

Whistle-blower backs alleged victims' claims of mortgage fraud, reported at SouthBendTribune.com.

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