Mark your calendars for July 9, 2007. That’s when a U.S. District Judge in Harrisburg, Pennsylvania, will hear opening arguments in a case alleging real estate fraud involving Chase Manhattan Mortgage Corp. and a Pennsylvania developer and an appraiser. According to yesterday’s The Morning Call newspaper (which covers the state’s Lehigh Valley region), a federal lawsuit alleging a conspiracy between a Pocono’s developer and one of the nation’s largest mortgage companies to defraud more than 100 home buyers has finally been scheduled for trial.

From The Morning Call:

Tannersville developer Gene Percudani, Chase Manhattan Mortgage Corp., Stroudsburg appraiser Dominick Stranieri and several others engaged in widespread fraud by selling homes at inflated prices through several of Percudani’s companies, including Raintree Homes, Why Rent? and Chapel Creek Mortgage.

Among those expected to be subpoenaed, said Weiss [sic: a New York attorney representing the plaintiffs] are mortgage companies Fannie Mae, the Federal National Mortgage Association, and Freddie Mac, the Federal Home Loan Mortgage Corp., and the state Department of Banking…

Many of the buyers were minorities from New York and New Jersey, the suit said. But the buyers alleged the homes cost far more than advertised, and their real value was tens of thousands below the inflated purchase price. Unable to sell the homes or refinance their mortgages, many of the plaintiffs were forced into bankruptcy and foreclosure while others suffered financial hardships.

Weiss alleged that Chase Manhattan Mortgage, which bought the mortgages from Percudani’s Chapel Creek Mortgage company, knew of the fraud but continued to buy the mortgages anyway… Chase agreed in 2002 to ‘’write down'’ as many as 200 mortgages originated by Percudani’s company by as much as $50,000 each after independent appraisers hired by Chase determined the homes were sold for far above their value…

Chase, which has denied any wrongdoing, claims it was duped and has sued Percudani. …”

It seems that no one, not even one of the largest and most well respected financial institutions in the country, is able to avoid the fraudulent wave of activity that’s sweeping across the real estate landscape. A company as large and as sophisticated as Chase Manhattan Mortgage Corp. (now a part of JPMorgan Chase & Co.) should have been able to spot fraudulent real estate transactions from a mile away, one would think! Oh well, 15 months from now I suppose it’ll all get worked out. In the meantime–sad but true–a lot of unwanted speculation will be cast towards JPMorgan Chase & Co.