Property flipping and suspected mortgage fraud have produced a fertile field for federal investigators in Baltimore, setting off an expanding series of criminal probes.
At least three agencies -- the FBI, postal inspectors and the inspector general of the Department of Housing and Urban Development -- are conducting investigations. Another dozen and a half possible targets have drawn their interest, sources say.
The Maryland attorney general's office is in the early stages of an inquiry that could produce criminal as well as civil actions.
The investigations focus largely on speculators who buy and quickly resell houses at inflated prices to purchasers, cheating the buyer and the mortgage company that finances the transaction.
More than 2,000 properties have fit that pattern in Baltimore during the past three years, according to state records. Known as flipping, the practice is legal if the price paid by the second buyer reflects the true value of the house and the mortgage is obtained legitimately.
In most cases, a Sun investigation has shown, the price charged for a flipped house substantially exceeds its value. And the sellers manage to obtain mortgages for the buyers by falsifying documents to overcome credit problems and to assert that buyers are putting more cash into the deal than they are.
"It's an epidemic," said Philip Kesaris, assistant HUD inspector general for investigations. "What you're seeing in Baltimore goes on in Chicago, New York and Southern California," he said.
Constance Wilson, senior vice president of New City Asset Management Inc. of St. Charles, Mo., who has investigated mortgage fraud for 15 years, said, "Flipping is the most profitable type of mortgage scam."
Experts say most mortgage fraud cases do not involve the flipping of a property, though. They contain other elements of flipping, such as inflated appraisals and falsification of documents.
The latest mortgage scheme to surface is "identity theft," said Rebecca B. Walzak of Fort Lauderdale, Fla., who advises mortgage companies on fraud prevention and detection. "It's all valid data," she says of the information used to obtain a mortgage. "It just doesn't happen to be the right person."
A major flipping investigation is scrutinizing Robert L. Beeman, a Wilmington, Del., man who has sold more than 100 Baltimore houses in the past few years after doing minor cosmetic repairs; Walter Duersch, who sold dozens of properties; and the people who worked with them.
Beeman's attorney, Gerald D. Glass, declined to comment. Duersch's attorney, Gerald C. Ruter, said, "It was never Mr. Duersch's intention not to apprise everyone in the process of how the transaction was structured, and that would include the purchaser."
One of Beeman's customers was Tabatha Evans, a 27-year-old single mother of two boys, ages 4 and 6. Two years ago, Evans paid $78,000 for a sagging two-story rowhouse in the 2400 block of E. Fayette St. that Beeman had bought six months earlier for $6,500, according to state records.
Evans said she was looking for another apartment to rent when she learned about Beeman's house, which he offered to sell to her for $45,900.
When she went to settlement, Evans said she noticed that the price was listed at $78,000 -- with a mortgage for $50,700. "I asked what these numbers were about," she said.
"He said those were just the numbers they used to fix the mortgage. Every time you asked a question, he said, `I got it covered.' This is my first time buying a house. I didn't know anything about buying a house."
Evans says her income from welfare and Supplemental Security Income is about $900 a month. Her mortgage application, filled out by the mortgage broker on her deal, said her income was $1,860 a month. That included $500 as a child-care provider, a job she didn't have, Evans said.
Recently, Evans told her story to federal investigators, who have collected documents on numerous Beeman deals and interviewed some of his buyers.
"The main focus was, did he mail stuff to me?" she said of the questioning by postal inspectors, who, sources say, want to prosecute Beeman under mail fraud and wire fraud statutes.
Robin Neeley also was questioned by postal inspectors. She bought a house in the 800 block of N. Curley St. for $56,000 shortly after Beeman paid $16,500 for it.
She met Beeman through a rent-to-buy ad he had placed in a newspaper. After contacting Beeman, she told him she didn't want to buy a house, fearing she didn't have the money.
"He said, `We can work something out,' " Neeley remembers.
Postal inspectors asked Neeley to verify signatures on numerous documents -- some of which were forged, she said. They asked whether she had put thousands of dollars in cash into the deal, as documents alleged. She said she hadn't.
Lynne A. Battaglia, U.S. attorney for Maryland, declined to comment on specifics, saying only, "We are looking at mortgage-flipping issues."