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Commerce Department alleges real estate agent bilked mortgage lenders out of $3.3 million

January 25, 2012


For Immediate Release

ST. PAUL, MN – The Minnesota Department of Commerce is continuing its efforts to root out mortgage fraud in a troubled real estate market. Commissioner Mike Rothman has issued a statement of charges alleging that Steven Carver of Carver and Associates Real Estate orchestrated an elaborate mortgage kickback scheme that cost lenders $3.3 million and put more than 18 homes into foreclosure or short sale.

“The economic recession and depressed home values have created the perfect storm for mortgage fraud and other real estate scams in Minnesota,” said Commissioner Rothman. “Our Enforcement Division has been vigilant in taking swift and definitive action against scam artists who take advantage of consumers. We are focused on weeding out bad actors, and restoring trust and stability in the real estate market.”

Allegations against Steven Carver are the latest in a string of enforcement actions taken by the Department in response to a growing trend of mortgage fraud. Mortgage fraud accounts for roughly $10 billion in annual losses. Common mortgage frauds include: inflated appraisals, stolen identities, false loan applications, fraudulent supporting loan documentation, and kickbacks similar to those allegedly used by Carver. 

According to allegations in the Commissioner’s statement of charges, on 18 separate occasions Carver arranged real estate transactions at inflated prices totaling nearly $6 million in fraudulent mortgages. In each instance, Carver allegedly arranged purchase agreements for tens of thousands of dollars more than each home was worth, delivered undisclosed kickbacks from loan proceeds to the buyers, and collected tens of thousands of dollars in inflated commissions for himself.

“This was a deliberate, carefully-orchestrated scheme designed for one purpose: to fraudulently rake in thousands of dollars under the table,” said Commissioner Rothman. “Mortgage fraud is not a victimless crime. It hurts homeowners, businesses, our neighborhoods, and our economy. That is why the Commerce Department will not relent in our efforts to snuff out fraud and ensure all Minnesota consumers are treated fairly under the law.”

Charges against Carver – who was a licensed real estate broker in Minnesota – include allegations that he bundled multiple home purchases to obstruct lenders from making informed lending decisions. The Department also alleges that Carver omitted information on loan documents in order to mislead lenders, using creative provisions like rent guarantees or carry-back loans to camouflage kickback payments.

In one complaint, Carver allegedly brokered purchases for $40,000 to $60,000 above the fair market value in the purchase of six homes, which resulted in a commission for Carver exceeding $41,000 and kickbacks totaling more than $155,000. All of the properties ultimately ended up in foreclosure or short sales.

Department investigators attempted to speak with Carver in June 2011 regarding these allegations, but were subsequently notified that he had left the state and would be leaving the country within days to sail around the ocean for “a couple of years.” Suspicious of Carver’s story, Department investigators visited his Minnetonka residence and found him cleaning the swimming pool in his backyard, roughly 1,200 miles from the Georgia location he had reportedly called from.

Steven Carver and Carver and Associates Real Estate were notified that a prehearing conference on the case will be held at the Office of Administrative Hearings on February 16, 2012 at 1:00 p.m.

Modify My Loan US, LLC
The Commerce Department took additional action in another alleged mortgage fraud scheme last week. On January 18, Commissioner Rothman delivered a consent order to Mark Abdel, minority owner of Eden Prairie-based Modify My Loan US, LLC. In the order, the commissioner ordered that Abdel pay a $25,000 civil penalty and be barred from engaging in any further mortgage origination activity in Minnesota. Up to $10,000 of Abdel’s civil penalty would be stayed under conditions outlined by the commissioner.

In August 2011, the Department of Commerce issued a statement of charges alleging Modify My Loan US, LLC and its owners defrauded approximately 200 homeowners, charging consumers more than $362,000 in up-front fees. Allegations against the company included: operating in Minnesota without a license; using false advertising; failing to disclose to customers its precarious financial condition; charging fees for loan modification services which were ultimately not provided; and failing to make promised refunds.

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Consumer Tips to Avoid Mortgage Scams

  • Check with the Minnesota Department of Commerce to see if a Credit Service Organization is registered or if a Debt Management Company is licensed. As of 2011, individuals and businesses providing mortgage origination and negotiation services are required by state law to be licensed with the National Mortgage Licensing System (NMLS), unless they are exempt.

  • Find out if the counseling agency is a member of a major association. These organizations work to ensure that member agencies meet certain quality and ethical standards and that credit counselors receive proper training.

  • Choose an agency that offers free face-to-face counseling sessions to discuss your spending habits, arrange a budget and help you handle your personal finances. Signing up for consumer credit services or a debt reduction plan over the phone or the Internet puts you at risk for losing money to a fraudulent enterprise.

  • Get an agreement in writing and read it before you sign it.

  • Avoid companies that require high up-front fees, "voluntary contributions" or a high monthly service fees that only add to your debt. Most legitimate agencies charge about $10 to $20 to start up a debt repayment plan and less than $20 per month in service fees.

  • If you are dealing with a debt management company, make sure you are kept informed about when and how much of your monthly payment is going to your creditors.

  • Beware of unrealistic promises, such as erasing your debt for pennies on the dollar in a short time span (most legitimate debt reduction plans take two to four years to repay) or promises to reverse a bad credit score. There are several free, reputable loan counseling services that can assist consumers.

  • Call the Minnesota Department of Commerce with any questions or to report suspicious activity. The Commerce Department’s Consumer Help Line can be reached by phone at (651) 296-2488 or (800) 657-3602. Questions or consumer complaints can also be sent by email to consumer.protection@state.mn.us or by mail to Minnesota Department of Commerce, 85 7th Place East, Suite 500, Saint Paul, MN 55101.