Two Miami men were criminally charged Thursday in federal court for an alleged mortgage scheme that crippled a Royal Palm Beach community as the men collected an unknown bounty.
Ernest Rodriguez and Jose Aller face charges of conspiracy to commit bank fraud stemming from condominium sales at the Kensington of Royal Palm Beach where inflated prices fooled banks and netted kickbacks for buyers, the complaint says.
The Palm Beach Post wrote a series of stories on the Kensington in 2010 and 2011, investigating what was dubbed “a sweetheart deal” for a Miami-based bulk buyer whose high-priced flips in 2008 left the Kensington with a staggering 73 percent foreclosure rate.
According to the complaint, Rodriguez and Aller marketed the condos nationwide for the bulk buyer, Kensington Trust, which was looking to unload the units fast as the market faltered. They promised guaranteed rent, cash rebates and seller-paid closing costs — none of which was disclosed to lenders.
Through a series of bank accounts owned by Rodriguez, Aller, Kensington Trust and a title attorney, checks were created that made it appear buyers were putting down payments on units when they were not, according to the court record. The bank then funded the inflated loan based on false forms.
A message left for Aller was not returned. Rodriguez could not be reached Friday.
“The way things were structured, we knew it wasn’t right, whatever it was,” said Mark Quinn, president of Banyan Property Management, which oversees the complex. “I imagine there was so much of this kind of thing going on at the time.”
The Kensington, located 6 miles west of Florida’s Turnpike off Southern Boulevard, was an apartment complex in 2005 when it was scooped up by a developer hoping to cash in on the condo conversion craze. As the real estate market began to crash, the developer sold its remaining units in early 2008 to Kensington Trust, which was led by former Miami hoteliers who were buying in bulk all over Florida.
Some of the sales that followed were so highly priced that the Palm Beach County Property Appraiser’s Office contacted the FBI.
A Palm Beach Post analysis of bankruptcy filings, court documents and property records showed investors nationwide bought heavily into Kensington in 2008, including a $715-a-week Costco employee from San Diego who picked up three units for $913,000.
In the same year, an Oregon paper mill worker with an annual salary of about $42,130 bought four units from Kensington Trust for $1.2 million.
At least one unit was even sold to two different buyers. First-time homeowner Ed Diaz bought in Kensington in early 2009 as a retirement investment. His deed and mortgage were never recorded in court records and his closing statement reflected a false down payment of 20 percent. But his unit was sold to Miami resident Madelin Ayala, who said her closing actually fell through.
Diaz stopped paying his mortgage, Ayala remains the owner of record in property appraiser files.
“This type of fraud went on not just in South Florida but all across the country, especially as the market crashed,” said Jack McCabe, chief executive of McCabe Research & Consulting in Deerfield Beach, who reviewed Thursday’s criminal complaint.
McCabe said it’s not the type or level of fraud that makes the Kensington case interesting, but the fact that it’s even being prosecuted. Five years after the deals were done, he was beginning to think no one would get caught.
“This may only be the tip of the iceberg,” McCabe said, noting that there are three other unidentified people implicated in the complaint.
Today, just 12 of Kensington’s 167 units have homestead exemptions, meaning the owner considers it their primary residence. Michael Kaiser, who bought his unit in 2006 for $235,900, said the complex went through a rough time, but is coming back.
“We’re trying to concentrate on the positive things,” said Kaiser, whose unit’s total market value is $59,000. “Slowly but surely, things will keep getting better.”
The Palm Beach Post wrote a series of stories on the Kensington in 2011 and 2012 scrutinizing transactions that left the Royal Palm Beach condominium with a 73 percent foreclosure rate.