The two men who masterminded a huge mortgage fraud scheme that lay waste to parts of north Minneapolis are in prison and say they're broke.

And now they're on the hook for $11.7 million, a federal judge ruled Tuesday.

In a five-minute court session in Minneapolis, U.S. District Judge Joan Ericksen ordered restitution from Jonathan Helgason and Thomas Balko, co-owners of a Roseville-based firm that bought and then resold houses for inflated prices to straw-buyer investors, mostly in north Minneapolis.

The amount was based on claims by 24 victims and agreed upon by Assistant U.S. Attorney Joe Dixon and defense lawyers for Helgason and Balko.

The pair, sentenced in April to eight and seven years, respectively, will be responsible for paying the millions together and through their company, TJ Waconia. They were not at the court session Tuesday.

Dixon called the order substantial.

"The significance is people will not profit from committing mortgage fraud because ultimately they will be held responsible for the losses caused," he said in an interview.

Helgason, 46, of Chisago City, Minn., and Balko, 38, of Rogers, pleaded guilty a year ago to fraud in a three-year scheme that the government said involved $35 million in mortgages on 162 properties, helping to make north Minneapolis the epicenter of foreclosures in the state. The men gained $14 million in the resale of houses, prosecutors said.

Their scheme, one of the Twin Cities' largest real estate fraud cases, was revealed when neighborhood group staff members in the Folwell and Webber-Camden areas took note of mass foreclosures that left blocks lined with vacant and deteriorating houses.

Dixon described the men's trail of transactions as "an enormous disaster" that shifted risk onto new home buyers in Ponzi-esque fashion.

Because the rents from the properties covered only half of what Helgason and Balko were obliged to pay investors, the scheme couldn't succeed without a dramatic rise in housing prices, Dixon said.

The biggest victim is SunTrust Mortgage Co., which claims $9.6 million in unpaid mortgages.

The city of Minneapolis is second, with $950,000 in costs associated with the fraud.

"Our office is pleased we can support communities in addressing the problem of mortgage fraud," Dixon said. "Mortgage fraud affects real lives and has had a substantial negative impact on communities, neighborhoods and quality of life."

Minneapolis Housing Director Tom Streitz said the costs to the city were significant, ranging from legal fees to lost property taxes and basic maintenance of the houses.

The city hired a lawyer to oversee the disposition of the properties and worked to maintain them on a basic level to avoid driving down property values on neighboring houses, he said.

"Many of these properties became havens for criminal activity," Streitz said.

The houses also were targeted by thieves who would strip them of copper piping and sell it, Streitz said.

"There's quite a list of things that cost the city when a property goes into foreclosure," he said.

Helgason and Balko apologized in court at their sentencing, where they also said they were broke.

But Ericksen said she rejected their lawyers' argument that the losses could be blamed on the collapsed housing market.

Helgason got a longer sentence because he holds a state real estate license that put him in a position of public trust. The judge told him at sentencing she wasn't satisfied that he has been forthcoming on disclosing his finances or fully taken responsibility.

Joe Tamburino, who represented Balko, said neither defendant had an objection to the amount.

Both men are at the Federal Prison Camp in Duluth.

Rochelle Olson • 612-673-1747