Baltimore homes jumped from $40K to $200K in months with no renovations in alleged extensive real estate fraud scheme

A Baltimore rowhouse sells for $40,000.Just months later, it changes hands again for around $200,000.There’s just one problem: According to a new lawsuit, virtually nothing happened to the house in between.That dramatic leap in value was allegedly repeated across dozens of Baltimore properties as part of a sprawling mortgage fraud scheme that one lender says left it with more than $14 million in losses.AmeriTrust Mortgage Corp.

filed a federal lawsuit in Maryland, accusing a network of real estate investors, a mortgage broker, appraisers and title companies of working together to make inexpensive properties appear far more valuable than they really were.The alleged playbook was surprisingly simple.Companies tied to the scheme would buy homes in and around Baltimore for roughly $40,000 to $50,000, according to the complaint.Within months, and allegedly without making improvements, the properties would be sold to other shell companies for around $200,000 — a roughly 300% markup.The much higher sale price could then support a much bigger mortgage.AmeriTrust claims the new buyers applied for financing using appraisals and title reports that failed to disclose those recent, far cheaper transactions.

In other words, the lender alleges it was being shown a $200,000 house without being told that the same property had recently been a $40,000 or $50,000 house.Once the loan closed, the proceeds went to the seller.Then, according to AmeriTrust’s charges, some borrowers barely bothered making payments.The lender alleges the buying companies never intended to repay the mortgages and defaulted almost immediately, in some cases failing to make even the first few months of payments.That left AmeriTrust in a bind.

The company had sold the mortgages to investors, but once the loans went bad, it faced losses tied to mortgages that it alleges were far larger than the homes securing them were actually worth.Multiply that process across roughly 90 loans and AmeriTrust says the da...