Suspicious Flips Hurting Hernando Beach

In Hernando Beach, Florida, the St. Petersburg Times reports:

• [S]uspicious sales have made "mortgage fraud" a buzzword in Hernando Beach the past two years. Though fraud cannot be proved without a criminal investigation, evidence of improper dealings during this period has been steadily mounting. By analyzing property records, the St. Petersburg Times found dozens of what the FBI calls indicators of mortgage fraud. These include houses, such as the one on Hibiscus, that began to slip into foreclosure almost immediately after their purchase.

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• [T]he most direct consequence is to the local real estate market. Disinterested, absentee owners often neglect their properties, bringing down the real worth of nearby houses. At the same time, fraudulent prices artificially inflate local property values and discourage buyers. [...] Dishonest investors apparently targeted Hernando Beach because its waterfront houses were expensive enough to hide inflated prices, said county Property Appraiser Alvin Mazourek.

The Times investigation found four area homes that most closely fit the pattern the FBI describes as evidence of mortgage fraud.

• Transactions on these properties, all of which are now in foreclosure, began with a purchase by a Spring Hill investor named Kathy Schmidt or one of her companies - Soni Homes Inc. or Gulf Coast Instant Equity Inc. Schmidt then resold them to someone associated with a now-defunct Tampa company, Real Estate Exchange Partners Inc. People involved with that company included president Steven Michaelson and Robyn Michaelson, both of whom face foreclosure on properties throughout the Tampa Bay area. Though their relationship is not clear, they list several common addresses in property records. Neither could be reached by the Times at any of the several telephone numbers listed in public documents.

For more of the St. Petersburg Times investigative report, including the recent sales history of the four suspicious flips decribed in the story, see When the price is wrong (Sometimes, a sudden jump in the price of a house could indicate mortgage fraud).

See also, St. Petersburg Times Editorial on the suspicious Hernando Beach real estate transactions: Time to check rumors about mortgage fraud.