How Minnesota became the second-highest state for mortgage fraud -- or not

This north Minneapolis house was one of the properties featured in a 2006 fraud scam.

​Minnesota is either the second-best or second-worst place to hatch your mortgage fraud scam.
The Mortgage Fraud Index came out yesterday morning and ranked Minnesota second-highest in the country for incidence of mortgage fraud.

But a closer look at the data suggests we're not overrun by hucksters. In fact, the state's high rating might be the result of its willingness to prosecute con artists. The index ranks states based not by the total number of frauds, but on the number of criminal charges and civil complaints filed against fraudsters.

Hennepin County Attorney Mike Freeman tells City Pages his office devotes considerable resources to fighting mortgage fraud.

"One of the reasons our numbers are high is because it's a priority of mine to go after these cases big-time," he says. As of June, Hennepin County attorneys have filed 52 cases against 66 defendants in the past year.

Freeman's office was caught flat-footed in dealing with mortgage fraud in 2003, he says, and struggled to combat it for a few years. Beyond that, in 2008, the Hennepin County Attorney's Office hired four lawyer just to handle mortgage fraud cases. Then his office applied for a grant with the Department of Justice to add two more attorneys, several investigators, and a paralegal, to take on even more cases.

Mike Freeman says the state's home to fraudsters -- but more importantly, it chases them down.

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One of the reasons mortgage fraud cases don't get prosecuted, Freeman says, is that they require immense resources to pull off. Because of this, he says, other district attorneys don't prioritize handling mortgage fraud cases.

"I've filed more cases than all the other county attorneys [in Minnesota] combined," he brags.

"These things are big cases and take a lot of time to bring them forward," he adds. "We tried to make this a significant priority, and we did."

Holly Himel-Wright, an editor at MortgageDaily.com, confirms their study tracks known cases and isn't an indicator of total number of cases.

"Anytime somebody is indicted or they are arraigned, or acquitted, that is considered an entry," she says. "It's really a case activity log, not total cases, per se."

So Twin Cities prospective homeowners shouldn't worry that their state is more corrupt than the other 49 -- but they should perhaps be concerned that there will be fewer prosecutions in the future. Freeman tells City Pages that the county's grant from the Department of Justice is set to run out this March, which means fewer lawyers will be working on these cases.

Freeman says the county is trying to find more grant money. Before then, fraudsters are welcome to skip through the loopholes in the shade of the second-most fraudulent state in the country -- until it turns out that it's just the second-best place to get caught.

Related:

• Jerry Moore has a controversial past
  
• James and Wendy Ober charged with massive, $10 million mortgage fraud scheme
• Joe Gustafson Jr. faces charges of mortgage fraud