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.