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ABC Special Report
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Homebuilder Mortgage Fraud Exposed
Tuesday, 25 September 2007

Mortgage scam threatens 200 homes with foreclosure
...The couple now fear they are victims of a $100 million mortgage fraud that may have touched hundreds across the south metro. Up and down their street, friends and neighbors who rented from Parish Marketing and Development - an Eagan homebuilder - have received foreclosure notices informing them their two-story dream homes will be sold at sheriff's sales. Some houses already have been resold.  As the housing market has cooled and foreclosure rates have skyrocketed, authorities are investigating a bevy of mortgage fraud cases across the state and nationwide - particularly in rural and far-reaching suburbs. This latest investigation is notable not only for the dollar amount but also for the number and concentration of homes.

Mortgage scam threatens 200 homes with foreclosure
BY FREDERICK MELO | Pioneer Press

Brian Holden and Leah Johnson dreamed of a more comfortable home for their three kids. In June, the Burnsville couple thought they had found one.

They moved into a newly built four-bedroom house - complete with a three-car garage - in New Prague for $1,300 a month and an option to buy at the end of their two-year lease. Their rent would go up $100 in the second year, to be put toward their down payment.

Holden, a truck driver, and Johnson, a stay-at-home mom, thought the setup was almost too good to be true.

They were probably right.

The couple now fear they are victims of a $100 million mortgage fraud that may have touched hundreds across the south metro.

Up and down their street, friends and neighbors who rented from Parish Marketing and Development - an Eagan homebuilder - have received foreclosure notices informing them their two-story dream homes will be sold at sheriff's sales. Some houses already have been resold.

As the housing market has cooled and foreclosure rates have skyrocketed, authorities are investigating a bevy of mortgage fraud cases across the state and nationwide - particularly in rural and far-reaching suburbs. This latest investigation is notable not only for the dollar amount but also for the number and concentration of homes.

Holden and Johnson consider themselves the lucky ones. So far, the only people who have come knocking are the FBI.

"The stuff that's going on out here is unbelievable," Holden said.

Two hundred homes Parish constructed in the south metro are entering foreclosure, drawing the attention of local and federal authorities.

The U.S. attorney's office has convened a grand jury to investigate the real estate deals and Parish's role in them.

An Apple Valley bank officer and a real estate closer from Elko New Market recently pleaded guilty in U.S. District Court to mail fraud in connection with millions of dollars in mortgage deals under investigation.

Their attorneys allege Parish is at the center of the elaborate mortgage scheme now under federal investigation. They link the developer to their clients, who admit bilking lenders and borrowers in that scheme.

The company's attorney, however, says Parish simply overbuilt when the housing market was strong.

The alleged plot involved an unnamed company - identified only as "Company A" in the plea agreements - that the U.S. attorney said used its connections to inflate the homes' value and then used "straw buyers" to obtain multiple mortgages and buy as many as 10 homes at a time.

The funds, stolen from unsuspecting lenders, helped keep the homebuilding company afloat even in a bad market, according to lawyers for the bank employee and real estate closer.

 
"We really wanted a nice house for our kids. Who knows if we'll still be here six months from now," said Leah Johnson, being hugged by her four-year-old daughter Madisen (cq), outside their New Prague home on Friday September 21, 2007. At least 35 of the 125 homes in the Prague Estates development, where Johnson's home is located, are entering into foreclosure. (Richard Marshall, Pioneer Press) (Richard Marshall)
Authorities have neither denied nor confirmed the Parish company's involvement. But attorneys for the bank officer and real estate closer said the cases are linked and that Company A is Parish Marketing.

Bill Walsh, a spokesman for the Minnesota Department of Commerce, confirmed that his agency is involved in the investigation.

"It looks like it involves maybe dozens of folks that we regulate and license - the appraiser, real estate agent, mortgage originator, notary public that does the closings, (and the) insurance salesman," Walsh said. "So we're going to take aggressive action toward anyone we license."

AN UNCERTAIN FUTURE

Michael Parish, 62, and his wife, Ardith Parish, 61, run Parish Marketing and Parish Homes from their Eagan home.

They did not return telephone calls, but their attorney, Ryan Pacyga, described his clients as respected builders who overbuilt when the housing market was hot and were overwhelmed by debt as it cooled.

Parish Marketing's homes, ranging in value from $300,000 to $500,000, are spread throughout Farmington, Elko New Market, New Prague and Lonsdale.

In New Prague, the company once owned 125 lots in the upscale Prague Estates neighborhood.

At least 43 of the houses built on those lots have been foreclosed upon and resold since Aug. 15.

"We are working with a number of parties to sell the properties, either to some tenants that have indicated a willingness and an ability to buy these properties, or to outside third parties," Pacyga said. "(The Parishes) are still committed to doing anything they can to mitigate any damages here. That means allowing renters, if they can, to stay."

In recent weeks, however, Holden and Johnson and their neighbors have received three letters informing them to mail their rent to three different places. That, coupled with the foreclosure notices, has residents wondering what's going on. They said they've received no explanation from Parish.

As a result, some have begun refusing to pay their monthly rent, or paying at the end of the month as a precaution against being evicted.

"As of right now, we don't know who to pay," said Erica Olsen, a former Farmington resident whose home in Prague Estates was sold at a sheriff's sale last week. "All the money that we've paid up until this point, where did it go?"

Jennifer Barger, who moved to Prague Estates from Maplewood in June, said she won't take that chance - she'll keep making payments on time, for the sake of her three kids. But other than newspaper accounts, she has no idea what's going on.

"Nobody will tell us if we're going to be living here in six months, or if we should start leaving," Barger said.

A BROAD WEB

You didn't have to be rich to get a mortgage for an upscale house through Ramiz Saadeh, or close on it with Kristopher Robbins.

Instead, the men made borrowers simply look rich on paper.

Saadeh, 30, of Apple Valley, and Robbins, 27, of Elko New Market, each pleaded guilty to one count of mail fraud this month. Robbins, a self-employed notary and real estate closer, and Saadeh waived their rights to an indictment and are cooperating "in the investigation and prosecution of other suspects," according to their plea agreements.

Saadeh's and Robbins' plea bargain stated that the scam involved 200 homes.

Their clients sometimes were people with limited funds and bad credit. But Saadeh, a bank employee at the US Bank in Burnsville, made it look as if they had deposited as much as $250,000 with mortgage brokers, according to his plea agreement.

Other "straw buyers" acted like investors, buying multiple houses with the apparent aim of reselling them at a profit. In one instance, Saadeh told investigators he helped two buyers purchase 15 properties.

Even as the housing market dragged, the loans helped keep the homebuilding company afloat.

"This is sort of the new, sophisticated fraud," the Commerce Department's Walsh said. "The appraiser is inflating the value of the home. The buyer is sometimes in on it. ... They're buying 10 homes in one day, and maybe they're not even employed."

The pyramidlike scheme eventually collapsed, and dozens of those homes fill the "sheriff's sales" notices of the New Prague Times and other south metro newspapers.

"One individual in particular owned eight of them," said Sue Jacobs, a New Prague Realtor with Kubes Realty. "It's a mess."

The investigation is ongoing, but Saadeh's plea agreement contends that as many as 50 mortgage lenders were victims of the fraud, and nearly $100 million in loans changed hands.

Robbins' attorney, Jerry Strauss, called the Parishes the central figures in the fraud and said they used relatives as their straw buyers.

"The big players are the Parishes," he said. "When the market was free and easy in terms of getting credit, they developed all these properties and put people in them.

"Once the bank gives ... a mortgage, they pay the developer. So if the house is $400,000, the Parishes get all the money. The Parishes developed a little conspiracy within the family - wives, cousins, sisters, brothers. Some of the relatives lived out of state, but their names were on the documents."

"What's really tragic is Parish was a really solid company for a number of years," Strauss said. "But when it was really easy to get credit, a lot of the developers started overreaching."

ACCUSATIONS FLY

In some instances, people allegedly moved into the houses not knowing that, while loans had been taken out in their names, the titles still belonged to someone else.

Pacyga, the Parishes' attorney, denied that any renters in a Parish home were misled into believing they were buyers. Some, he said, knowingly entered into a contract for deed, which can lead to title ownership over time as payments are made.

"We've got all the documents to prove those allegations are not true," Pacyga said. "Anybody that says that they thought they were the owners is just not believable."

But as part of his plea, Robbins, who handled titles, acknowledged completing "scores of fraudulent real estate transactions" backed by loans for people "falsely representing to be other persons."

Sometimes Saadeh used cashier's checks provided by the homebuilding company and passed them off at closings as if they came from the buyer. Robbins accepted the checks, knowing that they actually came from the seller, according to his plea.

On "straw buys," where multiple homes were purchased by one owner, Saadeh was rewarded with as much as $4,000 per property. He got a total of $50,000 for his role, according to the plea.

Saadeh's attorney, Doug Kelley, called it a relatively slim cut and evidence of his minor part in an intricate scheme with many players.

The developer "had all these houses that they had built and wouldn't sell. They were getting stuck with the payments," Kelley said. "Basically, it was a method of refinancing, to get somebody else (involved) to make it look like a purchase. Then, the developer could go to the bank and borrow money in that person's name, hoping that the market goes up."

Jacobs, the New Prague Realtor, noted that most of the sheriff's sales have yet to be held. When those properties hit New Prague's sluggish housing market, she fears they will drive down prices.

"Think of all those people who built in that area, who had nothing to do with Parish Homes, and now they've got all these foreclosures around them," she said.

Frederick Melo can be reached at This e-mail address is being protected from spam bots, you need JavaScript enabled to view it or 651-228-2172. 200

South metro homes in foreclosure and the focus of local and federal investigators.

$100M

Amount of a mortgage scheme that might have touched hundreds of families and as many as 50 lenders.

http://www.twincities.com/ci_6989050?source=most_viewed&nclick_check=1

 

 
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