According to HousingWire, Ameritrust Mortgage has filed a lawsuit in Maryland federal court against a group of investors, a mortgage broker, appraisers, and title companies over what the lender describes as an extensive real estate fraud scheme in the Baltimore area. The scheme allegedly involved about ninety loans on investment properties and resulted in losses of roughly fourteen million dollars to Ameritrust. The defendants named in the suit include mortgage broker FirstLoans Inc. and title companies REXTAR Title Services and Fidelity National Title.
The scheme operated by creating shell limited liability companies that purchased properties at low prices, typically in the forty to fifty thousand dollar range, and then quickly sold them to other shell entities for dramatically higher prices, often around two hundred thousand dollars. When those purchasing entities applied for financing from Ameritrust, the loan applications allegedly included fraudulent appraisals and title reports that deliberately left out the recent lower-priced sales history. According to the complaint, the buying entities had no real intention of repaying the loans and knew the lender was vastly under-collateralized.
Ameritrust claims the defendants used various tactics to cover their tracks, including having some of the shell LLCs file for bankruptcy protection to shield participants from liability. The lender also argues that this fraud scheme extended well beyond the ninety loans they directly financed, noting it was repeated hundreds of times across the Baltimore market. The lawsuit alleges the conduct violated multiple legal theories, including breach of contract, civil racketeering under the RICO Act, fraud, conspiracy, and negligent misrepresentation.
HousingWire reports that this lawsuit stems from a broader scheme that came to light nearly a year earlier, when investors were found to have purchased hundreds of homes across Baltimore, largely in majority-Black neighborhoods, at heavily inflated prices. Those properties were financed with debt-service-coverage ratio loans from multiple private lenders, and more than half of those loans ultimately defaulted. The wave of defaults exposed weaknesses in DSCR lending practices, where underwriting decisions focus on expected rental income rather than borrower personal income.
Ameritrust argues in its complaint that the downstream effects of this fraud extend far beyond its own losses, claiming the subsequent foreclosures and abandoned properties have depressed neighborhood values and destabilized vulnerable communities. The complaint even alleges that some abandoned homes connected to the loans have become dangerous, occupied by squatters.
What I am seeing locally here in the Bay Area is how important it is for all of us in the lending and real estate business to remember that these kinds of schemes can happen anywhere there is insufficient diligence and fragmented oversight. While this particular case is Baltimore-focused, it's a stark reminder that we have to stay vigilant about appraisals, title work, and loan applications. The damage to communities and to the overall health of lending markets impacts everyone, and in our own East Bay and Fremont markets, these cautionary tales make clear why proper underwriting and clear documentation of property history matter so much for protecting both lenders and the neighborhoods where our clients buy and sell.
