Top News

Minneapolis (AP) ― An alleged mortgage fraud conspiracy involving about 200 houses in the southern Twin Cities has led to estimated losses of more than $50 million, federal authorities have revealed in court.

The investigation stems from a string of foreclosures in New Prague and New Market, and possibly other suburbs. There have been evictions of some people who were renting the houses.

According to the company's attorney, the foreclosures are rooted in the sale of homes by Eagan builder Parish Marketing and Development to a small group of investors. To make the buyers appear as if they qualified for the mortgages when they did not, loan documents were allegedly falsified.

Those so-called "straw buyers" were unable to resell the properties -- ranging in price from $300,000 to $500,000 -- when the housing market collapsed this year. Some buyers managed to rent out the houses, but often the rental payments were not enough to cover the mortgages.

"All of a sudden, the pool of potential buyers who could take the mortgages off their hands significantly decreased," said Ryan Pacyga, the attorney for Parish Marketing. It left Parish Marketing and the investors with "overwhelming obligations."

According to public records, Parish Marketing is headed by Michael and Ardith Parish and the business is registered at their home address in Eagan.

Pacyga noted that the Parishes are "still working for a way for the situation to work out" and would welcome any large-scale investor who would come in to work with the lenders "to clean up this mess." He said the properties are still being maintained and that the only people who have been evicted are those who have not paid their rent.

Loan officer Ramiz Yousef Saadeh, 30, of Apple Valley, who worked for U.S. Bank until last month, pleaded guilty Wednesday in federal court in Minneapolis to one count of conspiring to commit mail fraud in connection with the alleged mortgage fraud.

Saadeh waived indictment and has agreed to help in the investigation and prosecution of others. Pacyga confirmed that the allegation against Saadeh involves his client, who has not been charged with any crimes.

Jeff Paulsen, chief criminal attorney in the U.S. Attorney's office in Minnesota, said the investigation is ongoing. He declined further comment.

But in a plea agreement filed Wednesday, the government said nearly $100 million in home loans were obtained and the homebuilder received "a substantial portion of the loan proceeds."

Saadeh admitted to providing brokers with falsified verifications of deposits for the buyers. Saadeh said that at the direction of individuals working on the homebuilder's behalf, he provided the buyers with cashier's checks to use at real estate closings when he knew that the checks came from the homebuilder's own funds.

The plea agreement notes that lenders require buyers to use some amount of personal funds when buying property to satisfy underwriting and creditworthiness requirements.

Doug Kelley, Saadeh's attorney, described Saadeh as a minor player who obtained about $50,000 for his services.

At the Prague Estates development, neighboring owners are upset about the effects of the foreclosures on home values while renters are unsure whether to stay or move.

Matthew Phyle, 38, rented one of the Prague Estates houses in June. The house was nearly 3,000 square feet and carried monthly payments of just $1,200. But after a Scott County sheriff appeared with a foreclosure notice less than a month after he signed a two-year lease, Phyle -- who has four children -- decided to move to south Minneapolis before the school year started.

"This has completely turned my life upside down," Phyle said.

(© 2007 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)