Mortgage Fraud Scheme Allegedly Skyrocketed Baltimore Home Values, Costing Lender $14M

A sprawling mortgage fraud scheme in Baltimore allegedly saw dozens of homes purchased for around $40,000 to $50,000 resold months later for approximately $200,000, despite no significant renovations. AmeriTrust Mortgage Corp. filed a federal lawsuit in Maryland, claiming this practice inflated property values to secure larger loans, resulting in over $14 million in losses for the lender.

The alleged scheme involved a network of real estate investors, a mortgage broker, appraisers, and title companies. According to the lawsuit, companies tied to the scheme would acquire properties in and around Baltimore at low prices. Within months, these properties were allegedly resold to other shell companies at a markup of roughly 300%, without any improvements that would justify the dramatic increase in value. Lenders like AmeriTrust were then presented with inflated appraisals and title reports that failed to disclose the recent, significantly lower sale prices.

AmeriTrust claims that borrowers often defaulted on the mortgages shortly after closing, sometimes failing to make even the initial payments. Because AmeriTrust had sold these mortgages to investors, the company faced the financial fallout when the loans became unpayable, with the properties securing them allegedly worth far less than the loan amounts.

The lawsuit asserts that this pattern was repeated across approximately 90 loans, leading to AmeriTrust's estimated $14.1 million in damages. The lender has filed charges including fraud, conspiracy to defraud, breach of contract, negligent misrepresentation, and civil racketeering under the federal RICO Act.

Named defendants include mortgage broker FirstLoans Inc., title companies REXTAR Title Services and Fidelity National Title, along with various appraisers, investors, and limited liability companies. As of the report, the defendants had not responded to requests for comment, and the allegations remain unproven in court.

The scheme allegedly centered on Debt Service Coverage Ratio (DSCR) loans, a type of mortgage popular with real estate investors that is underwritten based on a property's expected rental income rather than the borrower's personal income. AmeriTrust contends that these loans were combined with inflated appraisals and misleading title reports.

AmeriTrust suggests its case represents only a portion of the alleged fraudulent activity. Earlier reports indicated that hundreds of investment properties in Baltimore were purchased at inflated prices using hundreds of millions of dollars in DSCR loans from multiple lenders, with a significant percentage of these loans ultimately defaulting. The lawsuit alleges that the scheme was repeated hundreds of times across the Baltimore housing market.

The consequences, according to AmeriTrust, extend to the community, with potential foreclosures dragging down property values and some vacant homes becoming occupied by squatters, further destabilizing neighborhoods already contending with vacant properties.