Contributed Photo, One Of The ConvictedT.J. Waconia Fraudsters
Responding to my recent posts about the Larry Maxwell mortgage fraud trial, Hawthorne Housing Director Jeff Skrenes emailed a thoughtful response about the need for adequate funding to prosecute complex, highly-involved mortgage fraud schemes, especially in the hard hit area of North Minneapolis.
I knew Jeff The Mortgage Geek would have some great thoughts on this subject. Jeff says as follows...
It's interesting that as you blog about the Larry Maxwell trial, you also mention the David vs. Goliath nature of who has funding to do certain things.
Just before coming to Hawthorne, I met a victim of Maxwell's fraudulent tactics. I was working for ACORN at the time, organizing to get the predatory lending legislation passed. (THAT was a funding disparity in and of itself, mind you. Industry lobbyists reportedly got paid six figures just to come to MN for a few months to fight the bill. The only way you could say I got paid six figures is if you counted the two numbers AFTER the decimal point.)
And just before THAT, I was a loan originator with Centennial Mortgage and Funding.
In January of 2007, right before I left the industry, Centennial loan originators were trained in on how to spot what was called a "One-Transaction Flip." I don't know if this is now a commonly used term, but it was what Maxwell is accused of doing, and it is a type of transaction that is virtually impossible to do without violating the trust one has as a licensed real estate professional AND breaking laws in the process.
(JNS says: well, I certainly hope for Larry Maxwell's sake that he's gone to the effort of getting trademark protection) (Broken sarcasm font notification)
So I got the training to spot this incredibly complex, very profitable type of fraud. Then I left the industry and organized within communities affected by this fraud, and found someone who was a victim (and potentially participated in several such transactions with Maxwell).
With the help of a realtor, I looked on the MLS and saw that Maxwell was doing this over and over again. Just based on the volume of his transactions, we (this realtor and I) figured he had to be raking in at least $80,000 a month. And then earlier this year, thanks to your blog, I saw some of the court documents showing that he earned as much as 14.6% in realtor commissions - more than double the typical fare.
(JNS says: Oh, yeah, that would have just...um...jumped right out at me, too)
Obviously we don't know how much of that he had to share with his buddies- - loan officers, appraisers, title companies, buyers who got a cut, and shady "consultants" who referred either people or stolen identities to the Maxwell's. Even so, the amount of money flowing from these transactions was CONSIDERABLE. Large enough that one could perhaps save up $50,000 in mattress money in case one needed to post bail, certainly.
(JNS says: well, that whole thing about $50,000 stuffed in a teddy bear is...um...Hunter S. Thompson parody writing)
Imagine my surprise when I found out that this guy lived in the very neighborhood where I was hired as Housing Director. I had the technical know-how to understand what he was doing, he was right in front of me, and I knew enough realtors and others in the industry that could have kept a close eye on him in various ways.
Metaphorically, I had a target, I had plenty of ammunition, but I had no gun to fire it with. Why?
Well, there was a task force (I think it was in Hennepin County, but it could have been statewide) set up to deal with mortgage fraud. Right around that time, it had been shut down or its funding greatly reduced. The reasoning I seem to remember is that the cases were incredibly complex and required a lot of time and money, and didn't have enough of a guaranteed "return" (i.e. conviction) to make pursuing such cases worthwhile.
(JNS asks: I hope any readers who have specific information will comment and help nail down more details about when this task force was operating, when and why it was shut down, etc.)
That left reporting him (Maxwell) to the Commerce Department (run by Pawlenty appointees who really don't like to regulate things like, oh, COMMERCE) or the Attorney General's office.
I could have done more to refer things there, I suppose. I also brought up this case to an investigator, I think with the Minneapolis or Bloomington PD, at a Hawthorne Huddle when I had just started working as Hawthorne Housing Director. But I was still getting the lay of the land and was very new to the neighborhood. I didn't have the experience or clout to make this a huge priority when I had so much else to learn about my job and the neighborhood. It bothered me no end to know that there was mortgage fraud going on in my neighborhood and I didn't know how to stop it.
Yes, the FBI raided Maxwell eventually, but how many bad deals did he do before that happened? How many people were victimized? What was the continued damage to the community? How much more money did he rake in to pay top-shelf defense attorneys before things finally caught up with him?
And how many more Larry Maxwells are still out there, looking for the next way to scam people out of their money?
If we had the proper funding for mortgage fraud investigation, we could hold the fraudsters accountable, we could track them down before they take advantage of even more people with their next scheme, and we could send a message that in Minneapolis, in Hennepin County, in Minnesota, you do not come here and break the law.
If we don't get funding to get tough on mortgage fraud, then our other option is to get together and sing the opening line to "Everybody Knows" by Leonard Cohen. "Everybody knows the dice are loaded, everybody rolls with their fingers crossed. Everybody knows the war is over, everybody knows the good guys lost. Everybody knows the fight was fixed, the poor stay poor and the rich get rich. That's how it goes, and everybody knows."
In my more cyncial moments, I like that song, but I'd much rather put the figurative heads of fraudsters on a pole.
(JNS says: yeah, and while I'm at it, I'd like to wear their bloody metaphorical ears for a necklace)
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