By John Welbes
jwelbes@pioneerpress.com
Updated: 06/17/2010 11:32:17 PM CDT
Mortgage fraud scams tend to use the same bag of tricks. Just different victims.
Prosecutors in Minnesota say affinity fraud played a role in a $20 million scam in which the alleged fraudsters, of Vietnamese and Laotian descent, targeted investors from their own ethnic communities.
In a federal indictment unsealed late Wednesday, five people were charged with eight counts of mortgage fraud and one count of conspiracy.
If convicted, Thanh Van Ngo, Dang Hai Nguyen, Vince Long Nguyen, Trung Quang Tran and Jesse Steven Moxness each face penalties of 20 years on each of the eight mortgage fraud counts and five years on the conspiracy count.
The five accused could not be reached Thursday. A federal defender assigned to the case also could not be reached.
The indictments are part of a nationwide crackdown on mortgage fraud, Operation Stolen Dreams, that since March 1 has resulted in court actions against 36 people in Minnesota and 1,215 people across the country, federal officials said Thursday.
Prosecutors say the newest Minnesota case involved 54 homes in St. Paul, Buffalo and Coon Rapids, using sham buyers who were promised quick sales of the properties as a lure. A substantial number of those transactions involved Vietnamese or Laotian victims, said Chris Wilton, an assistant U.S. attorney prosecuting the case.
Whether it's targeting people of the same race, ethnicity or religion, a shared background with victims often allows criminals "to
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cross that first bridge of trust," said B. Todd Jones, U.S. attorney for Minnesota.
The alleged fraud ran from 2006 to 2009 and involved $20 million in falsely obtained mortgages and about $5 million in losses for mortgage lenders, prosecutors say. Investors were left with bad credit as properties went into foreclosure.
In the cases that have surfaced since the financial collapse of 2008, "affinity seemed to be an entry point for a lot of fraudsters," Jones said.
Most of the mortgage fraud cases that have been prosecuted in Minnesota stemmed from activity that took place in 2006 to 2008, "when the credit markets were so loosey goosey and the housing bubble was about to burst, but no one knew," Jones said.
Minnesota was in the top third of federal districts for mortgage fraud activity during that period, according to an FBI database, Jones said.
In response, Jones' office has added two prosecutors in the past year, along with a financial analyst and paralegal — all focused on mortgage fraud. The local FBI office has added about six agents in the same timeframe to investigate financial crimes, he said.
In the indictment released this week, the five are accused of recruiting straw buyers, falsely promising them kickbacks, and saying the properties would eventually be sold again for a profit.
Fraudulent documents "overstated investors' assets, income and employment status," the U.S. attorney's office said, while omitting existing real estate liabilities.
In one example detailed in the indictment, Tran allegedly used a straw purchaser to buy a Coon Rapids property with a loan of $410,400 from U.S. Bancorp. Prosecutors say that contrary to what was listed on the HUD statement attached to the sale, $108,000 of that amount went to Invescorp, a company controlled by Ngo and Tran that hadn't done any work related to the sale.
Prosecutors said Vince Nguyen owned a business that handled real estate closings, while Dang Nguyen recruited investors. Moxness allegedly built nine of the 54 disputed homes, and reportedly received $15,000 in fraudulently received loan proceeds for each residence built.
The latest trend in mortgage fraud locally, Jones said, involves reverse mortgages. While such instruments can legitimately be used to help elderly homeowners stay in their homes while tapping their equity for a steady stream of income, abuses can occur.
The problems become apparent, Jones said, when the homeowners die.
"If there are no kids who are getting the house," he said, then an unscrupulous institution that put together the reverse mortgage could walk away with the equity left in the house.
"If it happens quietly, and no one knows, they basically stole this person's house," he said. "We're seeing more of that."
John Welbes can be reached at 651-228-2175.