A Trickle-Up Effect of Mortgage Fraud
Way back in 2007, Alex Steback wrote a blog post about foreclosures in North Minneapolis that set Johnny Northside into motion. As I understand the tale, this is what motivated John Hoff to go to Blogger.com and start a blog of his own.
Hoff went on a bit of a real estate fraud rampage in BtM’s comments, which led to Stenback updating his original post with an interesting nugget that shows how far reaching and damaging white collar crimes like mortgage fraud can be:
Of course, these fraudulent sales distort the market, because they become comparable (albeit inflated) sales for legitimate transactions. Because of the sheer volume of properties involved, it is highly likely that many legit buyers in north paid more than the true market value. This is where mortgage fraud hurts everybody.
How ya like them apples? Credit worthy law abiding citizens of the City of Minneapolis may have overpaid for their homes (and are paying interest on the inflated financing) because they were under the impression that hundreds of recent fraudulent transactions were giving a fair perspective on the value of homes in that part of town.
Is there another level of pain beyond that? Are home owners in North Minneapolis paying more in property taxes due to artificially inflated home values caused by TJ Waconia’s fraudulent transactions?
While the city isn’t exactly flush with revenues these days, it would be rather odd if owners of some of the city’s least valuable properties were carrying a an extra tax burden due to such a high percentage of fraudulent transactions in that part of town.
September 30th, 2010 at 10:37 am
This is also a good argument for why lenders should do principal reductions when aiding a homeowner with a mortgage modification. Arguably, the item purchased (the house) was never worth the full loan amount to begin with.
September 30th, 2010 at 1:03 pm
I get the idea of doing modifications after the fact, but isn’t it kind of a slippery slope?
I recently purchased… no, stole my home for much under what I believe to be it’s true value. I don’t think it would be appropriate to raise my principal amount owed or raise my taxes because I purchased an “under valued home.”
Given the “free” market society we live in… anybody purchasing a home knows they are taking a risk. It’s like buying stock. Everybody signs contracts and agrees to the terms ahead of time, knowing that sale prices and property values are all fluid.
But then you throw in the potential MASSIVE amounts of mortgage fraud… and suddenly the letter of the law doesn’t look so appealing considering all the hurting families out there.
September 30th, 2010 at 1:29 pm
I agree. Assesments for the most part are determined from sales of similar properties in an area. As a South Minneapolis property taxpayer I want to thank the North for their subsidy.
Seriously, any homeowner who feels the value of their property is incorrect should contact the City of Minneapolis Assessor’s Office.
Dan
September 30th, 2010 at 1:59 pm
Dan is right, even though the city is cash straped an assessor will come to your home and will reassess if you feel the city’s tax value is too high. Our home was involved in mortage fraud and its last sale (prior) to our purchase, was $185,000 and our tax value was $115,000. Less than 2 years later it was foreclosed and we bought it for a bit more than 25% of the last sale price.
When the assessor came we had our inspection report and had printed out some selling prices of comprable homes in our area. The guy poked around our house a bit, took the paper work and in less than 2 weeks he dropped our tax value by 35,000 dollars. It was a simple process. Our home is worth a lot less, which is always diapponting, but our property taxes went down $500 bucks a year.
What I learned from the assessor is that tax values are taken from sort of an average, so huge spikes in sale prices don’t really affect tax value as much as comprable sales. It’s worth a call, but don’t expect the city’s tax value to match the foreclosed selling price, but if you have a realistic idea of what your home is worth the city will definetly work with you. Just wanted to share my experience.
September 30th, 2010 at 4:01 pm
While the content would appear to make sense, the fact of the matter is that the mortgage fraud you are referencing does not have near the impact on today’s market in NoMi and the current tax values should have next to nothing to do with TJ Waconia’s former properties there.
On the tax values: The last property TJ Waconia owned in Minneapolis changed ownership in 2007. The County has updated the tax values for all of their former properties from 2006 thru 2009 and will be updating again in a few months for the year 2010.
I might also point out that the City of Minneapolis ended up buying the majority of the 162 former TJ Waconia houses as part of their settlement with SunTrust Mortgage. SunTrust actually owned most of the houses at the time the city filed their publicized civil suit against TJ Waconia and they were not notified about the suit. The judge ruled for the city to get control of those houses and the city planned to have them managed by Gary Hansen. Problem was… The lawyers for the city did not have title pulled on the houses and assumed TJ waconia still owned them based off the County website. If the title was pulled, it would have shown that SunTrust actually owned them after they foreclosed and the redemption period had expired as well.
SunTrust counter sued the city as a result and the judge reversed his previous order and the city ended up having to buy a lot of those houses from SunTrust as part of the settlement.
The city over-paid for the houses when they bought them as they were only discounted 10% to 15%. The majority were bought at a 12% discount.
Since the city owns a lot of the houses you are talking about, I am sure the County did all they could to get the tax values down as far as they could get them since the city wouldn’t want to have to carry the property taxes at higher values.
October 1st, 2010 at 8:00 am
As usual, Jim Watkins, who doesn’t live in Minneapolis and is a self-proclaimed friend of the TJ Waconia mortgage fraudsters, is wrong on just about every point he thinks he’s making.
Let’s take another mortgage fraud case as an example of why his last sentence makes no sense. We’ll look at 409 31st Ave N, a property owned by Vicki Cox-Maxwell, wife of convicted felon Larry Maxwell.
http://www16.co.hennepin.mn.us/pins/pidresult.jsp?pid=1002924320020
The last sale is listed as $177,000 although that’s not entirely accurate. That’s the outstanding amount on the mortgage at the time the Maxwells’ fraudulent empire crashed around them and it went through foreclosure. Don’t be fooled by the assessed value of $19,500. This sorry excuse of a structure will be demolished any day now at a cost of about $15-20,000. The lot isn’t even worth the demolition cost. If the city were doing what Watkins thinks they are in terms of driving down property values, then the assessed value here would be closer to $7,500.
October 2nd, 2010 at 3:48 pm
Jeff,
What is your basis for saying I am wrong on every point I make? To put it another way, can you offer something other than a “he’s wrong” opinion?
I am not wrong that the city was forced to buy 48 of those houses as part of the settlement with SunTrust at a mere 10% discount. Here is the link to the proof. (Page 29, A,B,C & D) http://www.ci.minneapolis.mn.us/council/archives/proceedings/2008/20081010-proceedings.pdf
Is it your opinion that the city of Minneapolis is not against paying higher property taxes on those houses??? Why wouldn’t the city want the tax values to be lower if they are having to pay the taxes? Seriously.
You mention another fraud case but, frankly how can you make comparisons on the 48 city owned houses with any other house in north Minneapolis, regardless of who owns them?
For every house that was linked to any fraud case, one can also compare other houses in the immediate area that were not involved in any fraud case and the figures would be consistent with those that were linked to fraud.
The entire country suffered a major real estate crash. Fraud was only a part of the reason for the crash. Loose lending is the main reason behind the crash.
Finally, Can you offer a reason you felt the need to point out what my relationship was with TJ Waconia other than to bash or attack my credibility?
It would be the same tactic if I were to say your points are not valid and go on to offer your personal and business relationship with individuals who are involved in a number of unethical activities in addition to being seriously late with paying their taxes. Its the same thing and that is what you are trying to do.
Rather than dismiss my points based on who I know, I ask that you dismiss them with facts. Where I live is not relevent at all. If your point was accurate, then it would be fair to say that all the values of houses in a given area are not accurate because, the lenders and other experts don’t live in the area that was involved in a real estate transaction there. Its crazy.