Sentence for Helping Destroy a Neighborhood’s Property Values: Probation

Readers of Johnny Northside may be familiar with the damage real estate investors/fraudsters TJ Waconia had on North Minneapolis. The company was involved in a ton of fraudulent real estate transactions where homes were purchased at above their market value and later foreclosed while lots of money was pocketed.

This type of fraud involves a lot of players. If one person involved in the transaction says “no” the fraud can’t happen. But, no one said no, the fraud happened. Prices became inflated. Property values artificially inflated leading to unsuspecting home buyers paying more for their homes than they otherwise would have based on inflated comparable. And prices crashes as dozens and dozens of homes fell into foreclosure do to fraud.

One of the people involved in this process was Nathan Jesh. Without the work he did to close 175 sales, there would have been 175 fewer sales. Or, at least the fraudsters would have had to work harder to find a different accomplice. And, perhaps they would have had their scheme fall apart earlier while accomplice shopping?

Regardless, here is the cost of enabling fraud:

Nathan Daniel Jesh, 34, was sentenced Monday to three years probation for his role in the TJ Waconia mortgage fraud scheme. He pleaded guilty to one count of conspiracy to commit wire and mail fraud. Jesh, who was a closer at Total Title LLC, admitted in his plea agreement that he agreed to close at least 175 sales, though he knew that some loan applications contained fraudulent information. Jesh also knew that the seller – TJ Waconia – was providing the “straw buyer” with funds to do the deal.

There may be hundreds of home owners in North Minneapolis today who overpaid by $10,000 or more based on inflated comparables tied to the fraudulent transactions Nathan Jesh enabled. He didn’t hold someone up at gunpoint to steal from them. It’s much more subtle theft. And subtlety is why Jesh got probation while a guy robbing a gas station ends up behind bars.

9 thoughts on “Sentence for Helping Destroy a Neighborhood’s Property Values: Probation”

  1. Good article. North Minneapolis suffered the most with the highest foreclosure rates in Minnesota.
    I had not followed this case, I thought there were half a dozen or so cases going on relating to North Minneapolis.
    I did a post linking to the foreclosures by area in the Twin Cities, I can dig that up if you have interest.

  2. People underestimate the impact of inflating the housing bubble, this is not free equity for people, it is free money for banks (and all their enablers–appraisers, realtors, etc.).

    Every time a house is over-valued, that means the next buyer has to make that much more money to get into a house, which means each family has to work harder, take on extra jobs, spend more time away from their kids, which makes it more likely those kids won’t have parents reading to them or helping them with schoolwork, which means TV and video games are raising the next generation and school scores decline.

    Well, all I’m doing is reporting our recent history to anyone who has been paying attention and connecting the dots. I guess the real question is what will we/society choose to do about it?

  3. This is a story of personal responsibility. As you said no one held a gun to their head when buying a house. Just because I am approved for a $200k house doesn’t mean I need to buy a $200k house. I can rent or choose to buy a $100k house that is more affordable thus having a buffer when the economy turns down. It is up to the individual to value a property and if the price it too high, it is up to the individual to abstain from purchasing. It is ultimately up to the consumer to make the decision to buy vs. rent. It is hard to make the argument that this type of willing transaction is theft.

  4. @Wilfare cowboy, consumers take comparable home prices and overall market trends into consideration when making a real estate investment. That data was skewed due to fraud. Obviously, had home owners realized that home prices were inflated due to fraudulent lending, they would have had the information they needed to make a rational decision. In this case, the market’s access to information became imperfect due to fraud, which led to people overpaying based on fraud.

    As you sa, it’s up to the individual to value and property. They did, based on comparables in the market, what they saw people of similar means buying, and trends in the market. But, they didn’t consider that hundreds of homes in their neighborhood were being purchased fraudulently at inflated prices by straw buyers, and would soon fall into foreclosure, causing a housing price bubble followed by collapse in prices.

    Buyers need to be able to assume that there is honesty and transparency in the transactions used for comparables. And people who taint the market through fraud deserve more than probation.

  5. It would be interesting to see a more comprehensive, national breakdown about where mortgage fraud took place in the last half-decade or so.

    It seems to be the experience of Minnesota that most of the mortgage fraud took place in poor neighborhoods.

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