Authorities revealed in federal court Wednesday that they are investigating allegations of a mortgage fraud conspiracy involving about 200 houses in several southern Twin Cities suburbs.The investigation is tied to a rash of foreclosures in New Prague and New Market, and possibly other suburbs, and some people who were renting the houses have been evicted. The government estimates losses of more than $50 million.

In a subdivision called Prague Estates in New Prague, knee-high weeds have sprouted up around some of the houses. In one abandoned house, garbage was strewn across the living room floor.

“I wish someone would just get a match and some gasoline and torch the place,” said John Coldagelli, who owns the house next door. “This is destroying our neighborhood.”

The foreclosures are rooted in the sale of homes by Eagan builder Parish Marketing and Development to a small group of investors, according to the company’s attorney. Loan documents were allegedly falsified to make the buyers appear as if they qualified for the mortgages when they did not.

When the housing market collapsed this year, those so-called “straw buyers” were unable to resell the properties, which ranged in price from $300,000 to $500,000. In some cases, the buyers managed to rent out the houses, but often the rental payments were not enough to cover the mortgages.

“All of a sudden, the pool of potential buyers who could take the mortgages off their hands significantly decreased,” said Ryan Pacyga, the attorney for Parish Marketing. It left Parish Marketing and the investors with “overwhelming obligations.”

A 30-year-old loan officer for U.S. Bank pleaded guilty Wednesday in federal court in Minneapolis to one count of conspiring to commit mail fraud in connection with the alleged mortgage fraud.

Ramiz Yousef Saadeh of Apple Valley worked for U.S. Bank until last month. Saadeh said that at the direction of a homebuilder identified in court only as “Company A,” he provided mortgage brokers with falsified financial data from 2004 through May of this year. The information was used so that “straw purchasers” could obtain loans under false pretenses to buy the homebuilder’s properties.

Saadeh waived indictment and has agreed to help in the investigation and prosecution of others. Pacyga, the attorney for Parish Marketing, confirmed that the allegation against Saadeh involves his client, who has not been charged with any crimes.

Public records show that Parish Marketing is headed by Michael and Ardith Parish and the business is registered at their home address in Eagan.

Jeff Paulsen, chief criminal attorney in the U.S. Attorney’s office in Minnesota, said “the investigation is ongoing and we are unable to comment further at this time.”

In a plea agreement filed Wednesday, though, the government said nearly $100 million in home loans were obtained and the homebuilder received “a substantial portion of the loan proceeds.”

Saadeh, a naturalized U.S. citizen, admitted to providing brokers with falsified verifications of deposits for the buyers. And at the direction of individuals working on the homebuilder’s behalf, Saadeh said, he provided the buyers with cashier’s checks to use at real estate closings when he knew that the checks came from the homebuilder’s own funds.

Lenders require buyers to use some amount of personal funds when buying property to satisfy underwriting and creditworthiness requirements, the plea agreement notes.

In addition, the plea agreement says Saadeh provided personal information on two alleged straw buyers to individuals working for the homebuilder. The information was used in the purchase of about 15 properties, the plea agreement says. Saadeh said he provided falsified information and documentation for these buyers and received about $4,000 from the homebuilder for each property.

Doug Kelley, Saadeh’s attorney, said he and the government may argue over the amount of the losses in the case. He described Saadeh as a minor player who obtained about $50,000 for his services.

As the case unfolds, the Prague Estates development remains pocked with empty houses. Neighboring owners are irate about the effects of the foreclosures on home values, while renters, concerned that their homes may be put up for auction, are unsure whether to stay or move.

Matthew Phyle, 38, thought he found the home of his dreams when he and his family rented one of the Prague Estates houses in June. The house was nearly 3,000 square feet and carried monthly payments of just $1,200.

But less than a month after Phyle signed a two-year lease, a Scott County sheriff showed up at his door with a foreclosure notice. Phyle said he called Michael Parish for an explanation and was told, “Nothing in life is guaranteed.”

Phyle, who has four children, decided to move to south Minneapolis before the school year started.

“This has completely turned my life upside down,” he said.

Source:

http://www.startribune.com/535/story/1404510.html