Foreclosure Rescue Scam Leads To Civil Lawsuits, Federal Criminal Investigation; "Pilot-Straw Buyers" Left In Hot Water & Financially Ruined

The Minneapolis Star Tribune reports:

• Some Northwest Airlines pilots were looking for ways to make up for the steep pay cuts they were facing in 2005 when they learned of a "foreclosure rescue" plan promising them extra cash while helping struggling people hang onto their homes. Two years later, the pilots' credit ratings and their finances are in ruin. Several have been sued by some of the homeowners they tried to help.

• All told, the six pilots and one flight attendant sank more than $1.5 million into two real estate ventures, some of them taking out second mortgages on their own homes and raiding their savings for the cash. Their attorneys say they are another set of victims in the string of mortgage fraud and equity stripping cases that investigators continue to uncover in Minnesota in the housing bubble's aftermath.

• The foreclosure venture and related real estate investments are the subject of a federal criminal investigation, and total losses could exceed $2 million.

The foreclosure rescue operators involved were Timothy Beliveau, 39, of Mound, Minnesota and his wife, Shelley Beliveau, 36, a real estate agent. Reportedly, they could not be reached for comment for the Star Tribune story, and have invoked their Fifth Amendment rights against self-incrimination in some recent civil suits, declining to testify on the advice of their attorney.

• Court records show that the investigation is being led by the U.S. Postal Inspection Service and the Internal Revenue Service's Criminal Investigative Division. The probe spun off from an alleged equity skimming conspiracy involving Michael Fiorito, 39, of Prior Lake. Fiorito, who recently pleaded guilty in federal court, used to work with the Beliveaus, according to a source with knowledge of the case.

For more, see NWA pilots say they were misled in foreclosure venture (A Minnesota couple's investment and real-estate programs are under federal investigation) (if link expired, try here).

For story update (12-23-08), see Elderly Victim Of Equity Stripping Deal Wins Hollow Victory (Court Ruling Comes Too Late To Allow Recovery Of Home; Scammers Claim To Be Broke).

For more on equity stripping scams, generally, see DREAMS FORECLOSED: The Rampant Theft of Americans' Homes Through Equity-stripping Foreclosure 'Rescue' Scams (4.61 MB approx.).