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Monday, Sep. 1, 2014

Mortgage fraud scheme: How it worked

Wednesday, December 5, 2007

SIKESTON -- About six months after a housing scheme dealing with mortgage fraud in Scott County was uncovered, people are putting together the pieces on what exactly happened.

Tom Dirnberger, Scott County's recorder of deeds, said there were at least 300 fraudulent loans -- "meaning loans given on properties that were way over appraised."

Dirnberger speculated that even more of these cases may come in within the next month, as people will not receive tax statements on the property they believe they own.

In a typical case, the owner of the homes -- primarily on Sikeston's west end -- was offered more money than the house was worth, said Dirnberger.

In other cases, owners had the property stolen without their knowledge. Sikeston attorney Jim Robison has filed six lawsuits on behalf of clients whose names were forged on deeds. He said those deeds were used to obtain loans in an amount that was larger than the seller had been asking for the property.

Identified by several people as playing a prominent role was Cape Girardeau real estate agent Todd McBride. McBride was the president of Century Mortgage, which Robison said appears at the perimeter of all the transactions. "But none of the cases I have reflect Century Mortgage Co. as a party in any way," Robison said.

The process began when McBride or other representatives of the mortgage company, which is now defunct, located rental properties, which were free of debt. The owners were offered a price a few thousand dollars more than they were worth, said Dirnberger.

Then, an appraiser from the St. Louis area inflated the appraisals on the homes, he continued.

"They were mortgaged for more than what they're worth," said Robison.

Representatives from the mortgage company then recruited buyers.

A signed and notarized statement of Donnie Jones in response to a civil suit filed by Robison sheds light onto the process.

Jones, of St. Louis, is one of the people who invested in real estate through McBride.

According to Jones' statement, Alex Redus, an employee of Century Mortgage Co., approached him and other church members about investing, if they had adequate credit ratings. Redus also said he could arrange the financing and no down payment would be required; and that his company would manage the property -- and if there was a time the rental income was not sufficient to make the payments on the loan, the company would make up the difference.

Jones agreed to purchase 15 tracts, all without having seen the properties.

Jones and his wife, as well as McBride, attended a closing conference at Century Mortgage's offices in St. Louis County. There, he signed loan papers as well as a deed of trust in favor of Argent Mortgage Company LLC. He says he did not see any money being exchanged at the closing.

Later, he received a $3,000 check from McBride -- explaining that it was "just in case I needed extra money to make up a shortfall if we didn't have enough to make the mortgage payments."

Jones said he never personally made any installments on the note. When payments were due, McBride would bring a check drawn on Century Mortgage Company; or Jones would pick it up. But last December, the payments stopped. That month, McBride became ill and had surgery. He suggested Jones make the payments.

Jones said he made the January and February payments. "But by the end of February, I was out of money and could not possibly keep up the payments, so to my knowledge, no payments have been made on any of these loans since February, 2007."

Jones said he learned in May that neither McBride, nor Century Mortgage, ever had any interest in the property. He said he is satisfied that the deed is a forgery and he acquired no interest. He did not contest the lawsuit, which was not for monetary damages, but simply to clear up the title.

That seems to be the norm in these sorts of cases. Robison's six lawsuits "ask the court to make a ruling that the warranty deeds were forged and therefore invalid," he said. "It asks them to set those aside as well as the mortgage."

The forged deed would also be declared void.

None of his lawsuits name McBride as a defendant, although he's heard other cases do name McBride and the appraiser.

And just recently while in court, an attorney for one of the lenders asked for a leave of court to amend some proceedings - likely to name McBride and the appraiser as defendants as well.

Jack Vincent, a local real estate broker, said that he sold two homes to McBride and his associates. In both cases, his name was forged on the deed when it was resold.

He said that Century Mortgage reeled in new buyers by giving them money at the closing to pay all the costs, as well as offering to manage the property. Vincent said it appeared the company more or less helped the buyers learn the ropes, in addition to making the payments for awhile.

"Everybody was happy for several, then they started breaking away from Century Mortgage," he said. Vincent also noted that none of the people he learned about who were associated with the company had a real estate license.

Born and raised in Sikeston, Vincent moved back in the spring of 2006 from Louisiana, where he owns a brokerage. He said someone who bought houses through Century Mortgage approached him to manage his five properties. Vincent agreed.

"About eight other people out of St. Louis and Cape contacted me and wanted the same thing -- the break away from Century Mortgage," he said. "They said they weren't happy."

At one time, Vincent has managed more than 100 of the homes that are part of the scheme. He is now down to 22 -- because he broke partnerships with owners once their names came out in the newspaper that their home would be sold at a trustee sale.

Vincent said he thinks names were forged throughout the scheme; and maybe some weren't even reported. He also noted that the company needed a history of ownership to avoid raising red flags with the lenders. "Nobody complained, because they were getting their money," he said.

Dirnberger said, however, that deeds were only forged in a fraction of the cases -- when, at the end, McBride knew the scheme was about to be uncovered and began selling what houses were left on contract.

"But they were all fraudulent loans," said Dirnberger.

And in several cases, the owners weren't even aware the properties were being foreclosed on, said Dirnberger. Since the residences' addresses were in Sikeston, the foreclosure listings were in papers in this area, not St. Louis.

After they heard of the scheme, several owners, most of whom hadn't yet seen their properties, came down to look at them. "A lot of them were just glad to get rid of them," Dirnberger said.

Agencies continue to look into what exactly happened and uncover the truth.

Paul Boyd, Scott County prosecutor, confirmed there is an active federal investigation in the area.

When contacted for this story, Special Agent Herb Stapleton of the FBI's Cape Girardeau office, said he can't comment on the case.

Robison said several clients and others, including Jones, have been interviewed by the FBI.

He said he wasn't aware if there was a grand jury convened and looking at the case. However, Robison pointed out that almost all federal prosecutions originate with grand jury indictments.

Attempts were made to contact McBride; however, the phones were disconnected.