Indianapolis Firm Defrauds Buyers in Duplex Flipping Scheme

One of the largest mortgage fraud scams in recent years may have played itself out in a neighborhood in northeast Indianapolis where a small company, Land Economics, bought 184 run down duplexes in a depressed area of the city for approximately $50,000 each. A month later the company sold the 1940s vintage homes for $120,000 each. Routine home sales in the neighborhood ranged from $20,000 to $65,000.

The suspicious high dollar transactions were made with unsuspecting buyers almost 600 miles away in Martinsville, Va. They now tell federal investigators they have been defrauded and Countrywide Financial which purchased the Indianapolis loans on the properties is suing Land Economics.

The nationwide housing boom may be at fault for creating a climate ripe for mortgage fraud according to real estate analysts. As home prices went up, quick "flip" schemes to return high profits became more attractive than ever and encouraged the mortgage industry not to look as closely as it should at transactions processed. The reliance of the mortgage industry on independent brokers, appraisers, and other professionals contributed to the overall climate of negligent but speedy deals.

The county assessor in Indianapolis, William Birkle, was floored by the prices received for the dilapidated homes saying, "It's just the worse neighborhood in my township. At one point in time, the police barricade the neighborhood with concrete so there was only one way in and one way out so they could control the drug trade."

According to figures compiled by the Federal Bureau of Investigations, mortgage fraud in the United States hit the $1 billion mark in 2005, a substantial increase from the 2004 level of $429 million. Still, fraud accounts for only a small fraction of the mortgage business conducted in the United States each year with an estimated value of $3 trillion.