When Arizona Attorney General Terry Goddard says The violations alleged in this lawsuit are among the worst abuses of vulnerable consumers that I’ve seen in my time [as attorney general], you know he’s saying something.  Fraud in the real estate industry has reached new highs [or lows, depending on your point of view] here in recent years. The Attorney General’s Office filed a consumer fraud lawsuit in Pima County against 13 real estate agents and businesses.

Affected were over 130 investors and 270 prospective homebuyers, multiple defrauded lenders and 130 properties in foreclosure:

[Thanks M.R.!]

The complaint states that the defendants participated in a scheme that used deceptive tactics to entice under-qualified, novice investors into purchasing homes and then sold them to rent-to-own buyers. However, the attorney general’s office says the scheme was designed to fail by targeting rent-to-own homebuyers with credit problems and ignored whether they could qualify to purchase the homes.

The alleged scheme occurred in three parts. First, the scheme allegedly enticed investors to buy homes they could not afford. Second, it allegedly deceived lenders in order to allow unqualified investors to secure loans which would profit loan orginators. And third the scheme allegedly defrauded rent-to-own consumers into a scheme which was designed to fail.

Read the above link for the morbid details- I was amazed at how many fraudulent techniques this crew managed to pack into their master plan- and I’m pretty tough to amaze any more.  Here’s one thing that didn’t amaze me though:

According to the complaint, few investors read all of the loan documents presented to them for signing.

Kudos to Goddard for prosecuting this one, but there’s a limit to what the AG can do.  It’s tough to protect people who won’t take the trouble to protect themselves. We will never know how much fraud could have been avoided by consumers reading before signing, signing nothing they don’t understand and knowing that if it sounds too good to be true, it probably is.

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2. Street Gangs: Guns, Drugs- And Mortgage Fraud? (April 8, 2009)
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3. Bubble Fraud- Let the Lawsuits Begin! (March 4, 2007)
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4. Tucson Homebuilder Files for Chapter 11 (April 18, 2007)
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5. Platinum in his pocket, money in his shoes (February 12, 2009)
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