- Key Insight: Uncover how fraudsters used mismatched appraisal photos to secure inflated real estate loans.
- What's at Stake: Legitimate real estate development and municipal revitalization efforts are jeopardized by widespread foreclosure schemes.
Overview bullets generated by AI with editorial review.
A new lawsuit in a Baltimore fraud scandal is shining the spotlight on risks posed in real estate investment lending as well as the civic harm caused when scams become widespread.
The broadening scandal involves dozens of homes purchased by alleged ringleaders of the scheme: Eluzer Gold, Benjamin Eidlisz and Shraga Lerner. The three are accused of acquiring properties, many of which were vacant, rundown or in otherwise poor condition and securing inflated appraisals after supposed renovations, before selling the units to entities run by Gold, who secured the homes with debt-service-coverage-ratio loans from Commercial Lender
The details of the case demonstrate the importance of fraud recognition and vigilance when it comes to dealing with vendors throughout the purchase process, particularly in
The two mortgage lenders, listed as plaintiffs in the civil case, originated 59 loans to the group, and saw financial losses of more than $10 million when liens went delinquent and homes were foreclosed upon. The plaintiffs accuse Gold, Eidlisz and Lerner of fraud, conspiracy in violating the Racketeer Influenced and Corrupt Organizations Act among other charges.
"The fraudsters shared a common purpose of purchasing distressed properties and reselling them to the borrowers at prices that materially exceeded the properties' true market value," the lawsuit said.
"Each fraudster knowingly agreed that at least one member of the conspiracy would commit racketeering acts," it continued.
Also listed as defendants in the late-September legal filing are dozens of businesses and individuals in the appraisal and title industry, including Christopher Actie and Jason Taylor. The two Maryland-based appraisers provided valuations for all but one of the units in question on behalf of a variety of management companies, also named as defendants.
Clear Capital, along with several of its employees or agents who were assigned to perform independent desk reviews of the appraisals and approved them prior to loan disbursement, was also served papers.
Charges against the individuals and appraisal firms included unjust enrichment, professional malpractice and negligent misrepresentation.
The case comes on the heels of a similar lawsuit filed a few weeks earlier by wholesale lender AmeriTrust Mortgage Corp. against the same primary parties as well as broker FirstLoans, who facilitated the originations. That lawsuit involves 90 properties, with losses from the fraud costing AmeriTrust an estimated $14 million.
The developments were first reported by the Baltimore Banner. Attorneys for the leading defendants were not listed, while Clear Capital said it could not comment on pending litigation.
Lawyers claim the total number of homes purchased and foreclosed upon in the defendants' scheme could approach 500.
The timeline of events
In the scheme that ran between mid 2023 and early 2024, companies belonging to Lerner purchased the Baltimore properties, sometimes with financial assistance from Eidlisz. Arrangements were subsequently made to sell the homes to Gold, who applied for the fraudulent loans from Commercial and RCN with Eidlisz facilitating the process.
While original purchase prices ranged between $40,000 and $100,000, resale values came in two to five times higher following the appraisals of supposedly renovated properties.
Most of the homes purchased, however, were flipped and sold within weeks, an unreasonably short time frame for homes to undergo full renovation.
The lawsuit also noted that photographs used in the appraisals did not match the home involved. Attorneys for the plaintiffs pointed to mismatches in the appraisal reports with listing photographs, such as inconsistencies in layouts and floor plans.
"Appraisers used photographs that were not photographs of the subject property but instead depicted a superior property and used those false photographs, in part, to support an inflated valuation," the legal document said.
Based on the purported value of the homes, plaintiffs applied loan-to-value ratios to originate mortgages that were $80,000 to over $130,000 more than the price of the original purchases, with the perpetrators pocketing the proceeds, before allowing the properties to go into foreclosure.
Two firms named as defendants managed the vast majority of the resale closings: Commerce Title and Rextar Title. The two had also participated in the initial purchases of the same units by Gold and thus should have been aware of the rapid turnaround time and value of the properties, attorneys said.
Despite having inside institutional knowledge about the Baltimore market, the firms were negligent and failed in their fiduciary duties in neglecting to disclose unusual activity and agreeing to close the resale, according to legal counsel.
Upon discovery of fraud in the first half of 2024, the lenders immediately ceased working with Gold. The three alleged perpetrators then targeted AmeriTrust to prolong their scheme, submitting their first application to the company in April that year.
Commercial Lender and RCN Capital are seeking monetary damages of more than $12.2 million, which includes accrued interest and profits made from the illegal resales.
How fraud can proliferate among investor properties
Researchers often point to the elevated rates of
When looking at potential fraud, lenders are often so focused on identifying one-off cases, they may miss the type of red flags that appeared in the Baltimore cases, such as multiple transactions involving the same appraisers and title agents.
"One of the hardest things for lenders to do in a case like this is to see a pattern," said Matt Seguin, senior principal, fraud solutions at Cotality. "On a smaller scale, I would bet it's happening more than we know."
DSCR loans, in particular, pose risks because they do not rely on the types of documentation and verifications residential loans require for underwriting.
"It's really based on the property and the cash flow, and if you have a crooked appraiser involved, then now your big piece of the collateral obviously is very questionable," he added.
While the millions of dollars in losses represent a significant setback to the lenders, the current scandals are also thwarting revitalization efforts in cities like Baltimore that have sought to invest and rehabilitate blighted communities for years. Relatively low home values and an abundance of zombie and vacant homes can lure scammers, with the consequences of the crimes deterring legitimate developers.
The dozens of foreclosures resulting from the cases pushed the city's per-capita rate to one of the highest levels in the country. Certain Baltimore ZIP codes recorded foreclosure rates exceeding 500 per 10,000 households in 2024, according to Maryland's Department of Housing and Community Development.
