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Texas Twins Profit From Mortgage Mess They Helped Create


"It's a terrific way to make money," says one of Heritage Pacific Financial's Ganter brothers.

MINYANVILLE ORIGINAL "Real estate fraud is far more profitable and a lot less chancy than walking into a bank with a gun and robbing it," Curtis Novy, a California mortgage analyst, tells Minyanville. "And not only is it more lucrative, in a lot of cases you'll also do less prison time."

Data from Bloomberg shows costs "from faulty mortgages and shoddy foreclosures" exceed $72 billion "at the biggest US banks," with Wells Fargo (WFC), Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM), and Ally Financial -- owned by Cerberus, General Motors (GM), and the United States government -- racking up "at least $6.78 billion in new costs tied to mortgages during the second half of 2011."

The cases Novy says he's seeing most these days are short-sale fraud, and warns that "the market is being artificially deflated -- further deflated -- by people conspiring to bring down prices."

It stands to reason that short-sale fraud would become fashionable among a certain set at this stage of the mortgage meltdown, says Novy.

"A lot of these people started out in origination fraud, then those same people originating bad loans shifted over to modification fraud, and now they've gotten into fraudulent short sales," he says. "The creativity among these scam artists is just amazing."

Just as there tends to be fire where there's smoke, where there's fraud, there's money. And someone will invariably figure out how to get at it.

In late 2008, Dallas-based Heritage Pacific Financial began buying charged-off second-mortgage loans for pennies on the dollar, which it would then attempt to collect.

Heritage Pacific maintains these (former) homeowners committed fraud themselves when applying for their mortgages, making "material misrepresentations to secure large loans upon which they soon stopped paying."

"We are suing people for mortgage fraud," Ben Ganter, who founded Heritage Pacific with his twin brother Chris (the company's chief executive and main owner) told ABC News. "They lied about how much money they made, they bought multiple properties, and when they failed to make money, they walked away from the property."

But for a company like Heritage Pacific, the suburban streets of California are paved with foreclosed gold; the state is home to more foreclosures than any other in America, which is something the Ganters know how to work to their personal advantage.

Minyanville research turned up video of Chris Ganter in 2009, then running a Texas real estate investment trust called PayDirt, describing his role in ensuring people had no choice but to walk away.

"Invest in my REIT," he tells viewers. "Banks sell [homes] to the government, the government turns around and sells 'em to us. It's terrific. We buy them at $.60 on the dollar, and then we make--"

Just as Ganter is about to say the word "loans," a picture of a disheveled, bearded homeless man appears onscreen.

"Hello," he croaks.

"Oh, wait a minute," Ganter says, turning to "greet" his visitor. "Mr. Homeless Guy!"

Ganter then says, "The Democrats like everybody to have a house." So, he says, pointing to the homeless man to his right, "We're going to take this guy here and we're going to sell him one of these houses that got foreclosed on. It's great; it's a terrific way to make money!"

Yet three years later, Heritage Pacific says their business model is to target only those who have "made material misrepresentations to secure large loans upon which they soon stopped paying," rather than one of the "innocent home-owners who, through no fault of their own, lost their homes."

So would that be the homeless guy, or the guy who duped the homeless guy?

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