Michael R. Wayman Jr. was a top-tier real estate agent for ReMax before he discovered the lucrative business of redeeming properties after foreclosure to snatch their equity.
With that, his earnings mushroomed. His new company, C&M Real Estate Services, grossed $3.3 million in 2006 and $4.5 million the next year, according to court records. Wayman and his wife, Cori, reported annual income from their company as high as $497,000.
But somewhere Wayman's quest for profits veered into illegality, and the 35-year-old Ramsey man was sentenced Friday to just over three years in prison by Hennepin County District Judge Warren Sagstuen on 19 counts of racketeering, perjury and filing false documents. Wayman and his company also were fined $55,000 and face restitution payments to be determined later.
Prosecutor Tom Fabel sought a sentence of more than seven years, saying Wayman's use of false documents to redeem properties out of foreclosure constituted "massive, systemic abuse" that undermined the integrity of the public land records system. But Sagstuen said Wayman's violations weren't as serious as some racketeering conduct.
"I did not intentionally try to harm anybody," said an emotional Wayman, while family and friends testified to his character.
Officials said Wayman did business in at least four metro counties, and the seven Hennepin County properties on which he was charged ranged from Brooklyn Park to Eden Prairie.
"There are hundreds, if not thousands, of homeowners that have been approached by this guy in the metro area, and more by similar fraudsters," said John Villerius, who examined C&M files.
Villerius is the Hennepin County employee who blew the whistle on Wayman when Villerius supervised foreclosures as a manager in the Sheriff's Office. Villerius said he grew suspicious when Wayman repeatedly claimed to have paid the taxes on foreclosed homes to establish himself as the junior lienholder against properties with substantial equity.
When Villerius checked, he discovered some of those claims were false; later investigation found that Wayman and his company were padding other expenses they filed in redeeming foreclosed homes. Sometimes, those phantom expenses made it harder for foreclosed homeowners to redeem their property after a sheriff's sale. In other cases, padded expenses drove up the costs of more junior lienholders who redeemed.
"He was putting himself in the position where he couldn't lose," said prosecutor Fabel. Either Wayman redeemed a property and reaped its tens of thousands of dollars in equity by selling it, or if he lost it to a more junior creditor, he recovered more money than the expenses he had actually incurred.
Under state law, when a foreclosure occurs, a homeowner typically has six months following the sheriff's sale to redeem the property by paying off the debt owed to the foreclosing creditor. Some do so by selling the house or refinancing, but many owners lose their homes.
A house may have several mortgages or other liens filed against it. The priority of those claims is determined by when they were filed with the county. If the homeowner doesn't redeem the property, a junior lienholder must do so to ensure that its debt is paid. That is done by paying off the loan, interest and certain expenses of more senior creditors. The reward is that by gaining the house, the junior creditor not only gets the money it is owed but also keeps any remaining equity in the property.
People who specialize in buying up junior liens or creating new ones with the intent of gaining the equity are termed "bottom feeders" by Fabel, but what they do is legal under state law that is intended to protect junior lienholders. They can also claim certain expenses related to the property.
Wayman ran afoul of the law when he was found to have falsely claimed to have paid taxes on a house he wanted to redeem or claimed expenses that were inflated or were not allowed.
He is on probation in Anoka County after pleading guilty last August to filing a forged document there. He was fined $3,000 but $2,500 of that was stayed provided he have no similar infractions. The Hennepin County case isn't likely to affect his probation because the incidents occurred before his guilty plea, attorneys said.
The Minnesota Department of Commerce, which had reactivated Wayman's real estate license last year, revoked it last month, after Sagstuen found him guilty. Wayman redeemed at least one property even after his conviction, county officials said. Defense attorney Thomas Bauer said Wayman plans to appeal his conviction.
At Friday's hearing, Wayman sobbed at times as relatives and friends asked Sagstuen to spare him prison time so he could support his young family. "Everything we're worked for in the last 10 years is gone. We can't do anything in real estate. We've been blackballed," Wayman said.
But their portrayal of him as a loving family member contrasted with the picture of an abusive businessman drawn by Villerius and victims in testimony or interviews.
Lisa Lark, whose Brooklyn Park home was foreclosed while she was in prison, said, "This man came in and threw my children out on the street." Said her mother, Donna Wiese: "He came and changed the locks so we couldn't get our stuff out."
Wayman bought the rights to the house for $4,925 after a property owners association foreclosed on its lien on the $140,000 property. Neither woman knew of the foreclosure until the redemption period had expired. He also understated the price of the house to avoid more deed tax and falsely filed a claim to have paid $700 in property taxes on it, Sagstuen found. Wiese sued to recover the house and wound up paying Wayman $23,000 to get it back.
Steve Brandt • 612-673-4438