Foreclosures follow dealmaker

Padded prices on contracts send money to a man who is not even listed as part of the transactions.

By SUSAN TAYLOR MARTIN
Published June 16, 2007

Allen Robert Engel had a platinum card and a sterling credit record.

What he lacked was a steady job, though that apparently didn't bother lenders when Engel started buying houses in St. Petersburg last year. Nor did the fact that his clean credit history was due to a minimum of consumer spending - he had just been released after serving eight years in the Florida prison system.

Engel - a habitual offender - is already back in jail. And three of the houses mortgaged in Engel's name are in foreclosure while the man who arranged those and similar deals has pocketed hundreds of thousands of dollars.

"It's a pretty good racket, " says Joe Alberson, among the tenants who will have to move. "You find people with good credit and get in on a piece of property. You get a big fat check for yourself and collect rent for six to eight months before the property is foreclosed."

"It makes me sick, " Alberson adds.

The man behind the transactions is 36-year-old Jeremy Marc Morton, originally from the Detroit area. Like Engel, Morton is a felon. He spent 11 years in Michigan state prison on cocaine and attempted escape charges before moving to Pinellas County and getting into the real estate business in 2005.

Morton's name doesn't appear on the public records of six house purchases in which he was involved last year, four with Engel and two with a Detroit man named Ricky Phillips. But contracts and closing statements show Morton was the major beneficiary of all six transactions, collecting a total of $372, 500 through the kind of "cash-back-at-closing" deals that have roiled the housing market.

In such cases, the sales price is artificially inflated on loan documentation presented to the bank or mortgage company. The seller nets the amount at which the house was originally listed while the buyer - or a third party like Morton - gets part of the differential between the actual price and the inflated price.

Though it is illegal to make misrepresentations to a lender, Morton's dealings with the absentee Phillips and the now-jailed Engel show that cashbacks can be an effective way to make money on real estate with none of the obligations of ownership.

Says Alberson, the tenant: "Until I received the foreclosure papers with someone else's name on them, I believed Jeremy Morton was the owner, due to the fact he was the one who presented the lease and raised the rent."

Standing outside his girlfriend's Tierra Verde condo Friday, Morton told a reporter: "Anything I'd say would be misconstrued."

Nice guy, strange deal

As St. Petersburg's real estate market began to take off in 2000, Tom and Christina Barber decided to invest in property close to downtown. They bought six modest houses and rented them out for $425 to $565, including water and gas.

Last summer, Morton approached the Barbers and asked if they were interested in selling. He struck them as a high roller - he had a Hummer and a Mercedes, still with Michigan plates, that he called "my baby." His Park Place Investments firm had bought a lot on Gulf Boulevard at St. Pete Beach where he planned to put a sub shop.

"I thought he was a pretty nice guy, " says Barber, a manager at a Pinellas manufacturing company. "He said he was an investor, that his parents in Michigan were in the real estate business and that he thought the market down here was good. My impression was that he was buying the houses to fix them up, get a nice income and eventually sell them."

Morton agreed to buy all six houses. But Barber thought it strange that on each of the six contracts, Morton wrote in a sales price substantially higher than the amount for which the Barbers had agreed to sell. That way, Morton explained, the houses could be financed for the higher sum, with the difference at closing going to Banat Construction - of which Morton is president - to do renovations on the properties.

When they went to the first closing in August at a Safety Harbor title company, the Barbers were also surprised to see the buyer was Allen Engel, not Morton. Engel drove up in a late-model Ford pickup and got out wearing jeans and work boots.

"I said, 'What does that guy do?' " Barber recalls. "Jeremy said that Allen was an investor and that he did all the work on the renovations. I just thought the whole thing was strange."

Red flags everywhere

Two weeks earlier, Engel, 35, was released after serving time for a string of burglaries in 1997. But his criminal record dates to 1990 and includes convictions for burglaries and grand theft.

Engel wouldn't comment for this story: "I don't know what I can or can't say as far as making anything more difficult on myself or anyone else, " he said from the Pinellas jail, where he has been since December on violation of parole and firearm charges.

His sister-in-law, Sharon Engel, says that Engel met Morton through a mutual friend and that Morton offered to help Engel get back on his feet.

"When he got out of jail his credit was good and he got a platinum credit card, " she said. "Jeremy was basically the behind-the-scenes person, trying to help Allen, teaching him how to turn properties."

Engel signed the loan documents for four of the houses, all mortgaged at amounts far higher than what Barber says were the actual sales prices. One place was mortgaged for $225, 000, although Barber says he got only $125, 315.

The lender was Accredited Home Lenders, one of the many troubled subprime companies that charge high interest rates to risky borrowers. Accredited did not return calls for comments, but an expert on mortgage fraud says Engel's unusually thin credit history should have been a tipoff that he didn't have a job or steady source of income.

"It would definitely throw up some red flags because it would show no activity or new trade lines in years, " says Melody Shimmell, vice president of risk management at Century Bank in Sarasota. "Any underwriter worth their salt would notice this. "

Two of the other houses were mortgaged in the name of Ricky Phillips, whom the Barbers never met. At one point, a sales contract drawn up by Morton showed Phillips as the buyer of a house that was later mortgaged in Engel's name.

Phillips could not be located for comments.

As they did the cash-back transactions at each closing, Morton asked Barber to make out certified checks to him personally, not to Engel, Phillips or Banat Construction. To keep everything on the up-and-up, Barber filed 1099 forms with the IRS showing how much Morton had received from the sales: The total: $372, 519.90.

"I think it was a scam to begin with, " Barber says. "I know now I should have known something was not right. But I used a title company and only certified checks. I tried to do everything to make sure it was correct. I was amazed when I heard the properties were going into foreclosure."

Still in bad shape

Alberson and other tenants say Morton raised the rent and made them start paying their own water bills. He also told them they were responsible for repairs on the run-down houses, including a badly backed up sewer.

No city permits have been pulled for the "renovations" Morton said his construction company would do. Engel's sister-in-law says Morton paid her and her husband a total of about $1, 900 to replace a roof and do some painting, carpeting and cleaning.

Morton also told them he had opened an account into which money for Engel would be deposited. But on his application for indigent status to get a public defender, Engel said he had no job and no income. He listed $650, 000 in liabilities.

"I keep asking my husband, 'Where is the money going for all these properties?' " Sharon Engel says. "They're his (Morton's) friends, so I'm assuming he's not going to do anything bad."

The tenants say they've paid the higher rents - Morton or his agent collects them - but lenders have started foreclosure proceedings on five houses because no payments have been made in months.

A surprise

As he watched Bay News 9 one day last December, Tom Barber was startled to see the photo of a "homeless" man who had been arrested on various charges. It was Allen Robert Engel.

"I was flabbergasted, " Barber says. "Homeless? How could a guy who owns all these houses be homeless? I sent Jeremy an e-mail and said, 'So this is your investor.' "

Morton never replied.

Times researcher Carolyn Edds contributed to this report. Susan Taylor Martin can be contacted at susan@sptimes.com.

[Last modified June 16, 2007, 02:23:46]