Philadelphia Inquirer

NJ Charges Fraud In $5 Million Of Mortgages

The Philadelphia Inquirer — Tuesday, June 17, 2008

The Associated Press

NEWARK, N.J. — State authorities have charged mortgage brokers and others with a racketeering scheme involving more than $5 million in fraudulent mortgages that authorities said were designed to send 25 homes into foreclosure.

"The conduct involved ranges from acquiring properties through false mortgage applications to prevailing on a desperate homeowner to transfer the deed to her property to someone else on the false promise that she would be able to buy back her home," Attorney General Anne Milgram said Tuesday. "It is imperative that we root out alleged mortgage fraud like this and protect the victims of these predatory lending practices."

The charges came in three lawsuits filed Friday against 15 corporations and 21 individuals.

All are accused of engaging in a practice called "inflated sale and crash," in which investors are convinced to buy property at grossly inflated values through mortgage loans obtained using false information.

Some defendants were also accused of using the "bait and bump," in which a mortgage solicitor offers a loan on false terms, then informs the defrauded consumer at closing that it is too late for them to get out of the transaction. Others were accused of luring victims with bogus "rent-to-own" and "foreclosure rescue" deals.

Suspects profited by collecting unwarranted fees and commissions on the loans and transactions, officials said.

The charges were announced as New Jersey and the nation contends with a wave of foreclosures, many triggered by loans given to people who couldn't afford them, or so-called subprime loans.

The state has the nation's 13th highest foreclosure rate, with one legislator estimating that up to 16,500 New Jersey homeowners with subprime loans will face foreclosure this year. A watchdog group, New Jersey Citizen Action, estimated one in five New Jersey subprime loans could default by the end of 2009.

One lawsuit, against A&E Mortgage Co. and others, accused the defendants of inducing a homeowner facing foreclosure to transfer the deed to her home to a straw buyer on the basis of false promises, including that the homeowner would be able to buy back her home within a year. The homeowner was not able to buy back her home. It went into foreclosure and she has been served with eviction papers, the state charged.

A&E Mortgage president Darrin Jennings, who was among those charged, on Tuesday said he and the Roselle-based company are innocent.

"We've done nothing wrong. We're a reputable company. We've been in business for 15 years," Jennings said, adding that the dispute was between the buyer and seller.

The lead defendant in the second lawsuit, Ultimate Real Estate Solutions, of Williamstown, was accused of using the names and credit scores of "investors" to acquire properties through fraudulent mortgage applications.

It then leased these properties to rent-to-own consumers, who believed they would become owners of the properties while Ultimate paid the mortgages. But Ultimate collected rent without making mortgage payments, and investors lost properties to foreclosure while people were evicted, officials said.

A listing for the company was disconnected.

The third lawsuit's main defendant was American Millenium Co., which did business as American Mortgage Co. of Florham Park.

It charges that the defendants recruited buyers to purchase investment properties, though they may not have been able to afford them, by using false information to qualify the investors for the mortgages.

Messages left for American Mortgage company personnel were not immediately returned.

In addition to alleging a pattern of racketeering activity, each of the three lawsuits also charges violations of the state Consumer Fraud Act.


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