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Feb 13, 2007 11:28 am US/Central
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Prior Lake Mortgage Agent Targeted By Feds
Minneapolis (AP) ―
Federal investigators have uncovered what's described in court documents as a multimillion-dollar mortgage scheme involving real estate prices, in a case that industry leaders believe could have wide implications.
The scam, uncovered by the Internal Revenue Service, concerns more than 60 real estate transactions in Minnesota, all of them involving Jill Lehn, a former mortgage loan closing agent in Prior Lake.
Between December 2004 and August 2006, Lehn prepared loan documents that overstated the purchase price of properties and then concealed overpayments from lenders, according to the U.S. attorney's office in Minnesota. In December, she pleaded guilty to one count each of wire fraud and money laundering in U.S. District Court, and is awaiting sentencing.
The scam allowed buyers to pocket the difference between the actual purchase price of the property and the inflated mortgage amount. Lehn was the buyer in a half-dozen of the transactions.
In all, buyers netted more than $3 million in fraudulent payments.
Chris Galler, senior vice president of the Minnesota Association of Realtors, said in a letter to members that he expects "a series of arrests" in the next few months resulting from investigations into the Lehn case.
"We don't know how widespread (mortgage fraud) is, because finding one person leads to another and to another," Galler told the Star Tribune.
Pat Martyn, executive director of the Minnesota Association of Mortgage Brokers, said there've been hundreds of complaints of mortgage fraud to organizations statewide. He said it must be addressed by both law enforcement and with a legislative approach. Several bills aimed at reining in mortgage fraud have been introduced this year by state lawmakers.
The FBI has identified mortgage fraud as one of the fastest-growing white-collar crimes in the U.S.
Most of the cases involve deals among industry professionals and financial institutions, according to the FBI. Many include misrepresentation of the borrower's information and inflated appraisals to make up for the lack of a down payment or to generate more cash from a deal.
The real estate boom market in recent years helped create more opportunities for illegal activity, with much of it undetected until loans started going bad. In recent months, delinquencies and foreclosure rates have skyrocketed.
Since FBI agents confronted her in August, Lehn has cooperated with investigators. She said she wants to warn others into not being tempted to circumvent laws.
"I'm trying to make the best of a bad scenario," she said. "I made a mistake. I bucked up, I'm paying the price. I can't be mad or disappointed at anybody but myself."
(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)