Law Students Take Class Action On Behalf Of Inexperienced Investors Saddled With Inflated, Fraudulently Obtained Loans By Admitted Scammer

In Northern New Jersey, The Star Ledger reports:

• Investors who lost millions in a complex mortgage scam filed suit [Monday] against a real estate operation already the focus of an ongoing federal fraud investigation. The class-action lawsuit by Seton Hall Law School's Center for Social Justice charged that the scheme targeted minorities, the elderly and others with little experience in purchasing and financing real estate.

• Attorneys for the center said victims of the scheme were saddled with fraudulently obtained loans on investment properties worth far less than the purchase price. Unable to sell the residential properties, many fell into default less than a year after buying the multifamily houses, and subsequently into foreclosure.

• The suit named Maurice Bethea, 40, of Newark, who pleaded guilty earlier this month in federal court to conspiracy to commit mail fraud. He admitted orchestrating the sales of houses in need of serious repairs and major renovations to so-called "straw buyers," who quickly defaulted on their loans.(1)

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• The lawsuit yesterday was filed on behalf of at least 75 people who bought houses from Bethea over the past six years, said Seton Hall law professor Linda Fisher. "I have talked to dozens of people. I hear the exact same story each time," she said. "They were deceived and induced to buy properties they could not afford and would not have bought had they not been given false information."

• According to court documents, potential buyers were told that the properties they bought would have existing tenants, or they would have help finding tenants. The suit also charged that the buyers were misled with promises that they would receive rental income that would more than cover their monthly mortgage payments.

• Loan applications inflated purchasers' incomes, enabling buyers to qualify for mortgages that exceeded their ability to pay. In some cases, mortgage applications were used to obtain a second "piggyback" mortgage as well to finance the purchase of a property. Fisher said many have seen their credit ruined and may never be able to repair it. Others have filed for bankruptcy. Some have lost their live savings.

For more, see Poor investors' lawsuit alleges mortgage con.

(1) Also named in the civil lawsuit were several of Bethea's companies -- Blue Financial Group Inc., Born Asiatic, Greenfield Asset Holdings -- as well as Maplewood attorney Daniel Roy, who was reportedly accused of closing, in a hurried manner, on the vast majority of the real estate transactions.