Two Mobile, Alabama real estate investors, and a real estate company, have agreed to plead guilty to charges of bid-rigging at foreclosure auctions. The activities involved more people, these are probably just the ones who got an early deal in exchange for testimony against others.
The scheme sounds like something out of the tv show Dallas, or some other night time soap opera. The Justice Department said the plan involved a group of investors who would not bid against each other at the foreclosure auctions. After the public auction, the group members would meet and hold a second auction, just among themselves, to see who would REALLY buy the foreclosed real estate. I don’t know what they did with the extra money–the difference between the first auction price and the second auction price. I’m assuming they did not give it to a homeless shelter.
Here’s the press release from the Department of Justice, if you’d like to read it: CLICK HERE
You have to wonder what impact this will have on borrowers, who received a credit on their mortgage loans for the auction price, and then were possibly sued for the balance still due on the note. Perhaps without the bid rigging, these unfortunate people would not have had a deficiency balance. I hope the Justice Department has some plans to help out these victims. Banks are also victims, especially community banks who might not have been able to absorb such losses. Banks are not always rich behemoths. Hard working people of modest means usually own stock in their home-town banks. The ripple effects of this fraud could have been extremely wide. Congratulations to the Justice Department for discovering this, and prosecuting.