2 arrested in widening mortgage fraud scheme

Charges are expected Monday in the case involving straw buyers for hundreds of Twin Cites properties.

By Kevin Giles and Jim Adams

Last update: December 8, 2007 - 11:23 PM

Two suspects in the growing number of Twin Cities mortgage fraud investigations have been arrested on suspicion of racketeering and theft by swindle.

Donald L. Walthall, 40, of Anoka, and Rahmeen D. Underwood, 30, of Minnetonka, were arrested Friday. Walthall is the owner of
Universal Mortgage Inc. , a Brooklyn Park brokerage company that allegedly used straw buyers to buy property at inflated prices, and Underwood is a loan officer. The men, both released from custody, couldn’t be reached Saturday to comment.

The Hennepin County attorney’s office is expected to announce criminal charges Monday afternoon in what has become a widening mortgage fraud investigation involving hundreds of properties.

Barbara Johnson, president of the Minneapolis City Council, complimented County Attorney Mike Freeman for “being aggressive” in pursuing the fraud investigation.

And the fraud, she said, is proving more widespread than anyone anticipated.

Freeman declined to provide details Saturday on the possible charges or arrests.

County and federal officials have launched a flurry of investigations in the Twin Cities — much of it involving property in the west metro suburbs — alleging that phony documents have been used to bilk lenders out of tens of millions of dollars.

Victims include people who bought the homes on contracts for deed, original lenders and investors who bought loan packages, authorities have said.

A search warrant for Universal Mortgage records that was issued Nov. 13 authorized the seizure of all financial and banking transactions by Walthall, Underwood and nine other employees.

The Minnesota Fugitive Task Force arrested Walthall without incident Friday at an office building in Crystal, said special agent Paul McCabe of the FBI, which oversees the task force.

Underwood was arrested by Hennepin County sheriff’s deputies.

Earlier this year, a mortgage lender filed a federal lawsuit against Universal, accusing two employees of using fraudulent documents to make money from another real estate deal.

Property records showed that Universal has been at the center of a web of transactions where a small group of investors, including several Universal employees, bought rental properties and quickly resold many at above-market prices.

kgiles@startribune.com • 651-298-1554
jadams@startribune.com • 612-673-7658

Recent Local + Metro stories

California investigates whether churches were cheated by leasing companies - December 8, 2007

California investigates whether churches were cheated by leasing companies - California is investigating several companies suspected of bilking churches nationwide of hundreds of thousands of dollars through fraudulent computer leasing schemes, authorities said Friday. More