Friday, May 21, 2010

Well, this is odd.

The Clarke County, Iowa County Attorney was indicted for mortgage fraud on May 19, 2010. Ronald Wheeler is alleged to have acted as a "strawperson" in transactions involving Russell Blessman, who was also indicted. Clarke County is south of Des Moines, about halfway between Des Moines and the Missouri border.

The indictment alleges that Mr. Wheeler falsely claimed that he intended to reside in a house in Ankeny and obtained a $796,000 mortgage for the property, when in fact Mr. Blessman was going to reside there. He later obtained a $484,000 second mortgage for the same property, again claiming he lived in the property. Lenders give more favorable terms when the loan is for your residence as opposed to rental or investment property. And as discussed here, lying to lenders is illegal. The indictment further claims that Mr. Blessman paid Mr. Wheeler $29,000 for getting the mortgage for him. Apparently Mr. Blessman owned a company which bought and repaired properties.

Ok, now is where it gets odd. The indictment states that Mr. Wheeler claimed on his mortgage application that he made $360,000 per year and had $500,000 in his checking account in 2006. In 2008 he filed bankruptcy claiming $79,000 income and $1.2 million in debt from the above discussed property. Hmm...

And odder. Mr. Blessman is apparently already in federal prison. He was arrested in Utah for fleeing Iowa child abuse charges involving an eight year old girl. Uhhh....

And then odder still. According to the Des Moines Register, "Blessman was arrested in a Heber City motel after authorities found pornography and weapons in a room that had been visited frequently by children." Why in the world is there a Heber City motel room which was visited frequently by children, and nobody said anything until this guy was arrested? I don't even know what to say to that, except if you happen to see a motel room which is visited frequently by children, CALL THE POLICE. Seriously.

That was pretty odd, but then, the oddness continues. Again, according to the Des Moines Register, "A Utah official said in October 2007 that the 6-foot, 350-pound Blessman had been living in that state since June and had stayed, for a time, in a cave." So, he went from a million dollar plus house to a cave. In Utah. A. Cave. In. Utah.

Mr. Wheeler advised that he will be writing a letter to his local paper to explain his side of this odd story. Looking forward to that.

Tuesday, May 4, 2010

Mary Pat Harper Guilty Plea

Mary Pat Harper, an Iowa real estate agent, pleaded guilty to four counts of wire fraud. Ms. Harper acted as real estate agent for Robert Herdrich and Darryl Hanneken, who sometimes do business as Sand Castle Properties, LLC.

These folks would find a property they wanted to buy, and offer more than the seller was asking, usually much more. They would prepare what is often known as a "dual contract." The main part of the contract would show the inflated price. They would attach an addendum which showed the "real" price and the obligation for the seller to kick back the difference. What generally happens is, this addendum mysteriously disappears before it gets to the end lender. Here is an example of how it works:
Seller wants $70K for the house.
RH DH offer $140K.
MH prepares a purchase agreement which shows a $140K purchase price, and a separate piece of paper which clarifies that the purchase price is actually $70K, and the seller will give the extra $70K to RH and DH at closing. No matter how you slice it, the value of the house is $70K.
The lender only sees a purchase agreement of $140K.
Add in a "flexible" appraiser to value the property at $140K, and the lender has no idea they have loaned $140K for something worth $70K.
In some cases it appears that RH and DH did not make any payments at all.
The lender forecloses and gets even less than the $70K the place was worth in the first place, due to deterioration of the property.
Guess who gets to make up the difference?

Now you know why getting a loan has become so much more difficult. Thank folks like Darryl and Robert and Mary Pat, people who assisted them, and others like them across the country.

According to an article in the Quad City Times, Ms. Harper's attorney said that "the amount of money she received was somewhat minimal." What that has to do with anything, I cannot fathom. Say she was part of a group that robbed a bank, and while $200,000 was taken, she only got $20 of it. Does that make her less culpable? I would also think that "minimal" must be a relative term. According to RH and DH's indictment, there were 27 properties involved. Assuming $125K average purchase price, and assuming she got only half the commission (i.e., she was not a dual agent), we are still talking well over $100K. Maybe $100K+ is minimal to Ms. Harper's attorney, but it seems like a tidy pile of cash to me. And he is missing the point of what their actions did to neighborhoods in our community, and how much their actions are going to cost taxpayers when we bail out these toxic assets.

Ms. Harper is scheduled to be sentenced on August 27, and the two gentlemen will get their sentence on June 4. They face up to twenty years in prison. On second thought, maybe the amount of money received was minimal.