Thursday, April 03, 2008

Minneapolis Groups Sue Local House Flippers For Mortgage Fraud; Alleged Scam Involved 140 Homes, Most Vacant & In Foreclosure

In Minnesota, the Pioneer Press reports:
  • Three north Minneapolis neighborhood groups, backed by the City of Minneapolis, are suing a Roseville company called TJ Waconia for mortgage fraud involving 140 homes, most of them now in foreclosure or abandoned. At a press conference today in north Minneapolis, Mayor R.T. Rybak said they are suing for unspecified damages, as well as to retake the houses themselves. There is no dollar amount on the damages to the city and neighborhoods in the lawsuit, which was filed in Hennepin County District Court, and it isn't clear how much money can be obtained from the company. The lawsuit doesn't name the lender who made many of the mortgages to straw buyers.

  • Nonetheless, the lawsuit is the latest example of local governments swinging back at what they say are the villains in a foreclosure crisis that, for them, has become a community emergency. The cache of neglected and boarded up houses has blighted the area, dragging down neighboring property values, neighborhood leaders told reporters.

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  • The lawsuit names TJ Waconia LLC and various affiliates including TJ Holdings LLC, Total Title LLC, Absolute Appraisal LLC and CityWide Management LLC. Owners Thomas J. Balko, 37 of Rogers, and Jon E. Helgason, 44, of Chisago are also named. Balko was a licensed appraiser and Helgason a licensed real estate agent and broker, the lawsuit said.

  • The lawsuit charges that between 2003 and 2005 Balko and Helgason systematically bought and flipped 140 houses in north Minneapolis, using inflating appraisals. Within a few months of buying, the men would flip the houses, selling them at significantly higher prices to buyers believed to be either straw buyers or investors affiliated with Balko and Helgason. The homes were then rented out to people, but the mortages left unpaid. [...] More than half of the 140 homes are in some stage of foreclosure, and nearly 110 are vacant, according to Mary Cullen Yeager, a partner at Faegre & Benson representing the plaintiffs.

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  • The groups are charging TJ Waconia with one count of violating a state private nuisance statute, four counts of violating the state Tenants Remedies Act by creating nuisance properties, one count of violating the state's Consumer Fraud Act and charges Balko and Helgason with two counts each of racketeering.

For more, see Minneapolis groups sue Roseville firm over foreclosures.

See also:

Go here and go here for other posts on vacant homes leaving its mark on neighborhoods. neighborhood destruction from foreclosures zach

posted by Home Equity Theft Reporter at 8:01 AM