From Homescape

Federal law officials announced the indictments of 19 people Monday in two related California-based foreclosure rescue and equity-stripping schemes, which allegedly netted more than $12 million from over a 100 victims, while cheating them out of their homes.

California dreaming

The investigation into the housing schemes, which was appropriately coined “Operation Homewrecker” by law enforcement, is the product of an extensive dragnet by the FBI and IRS Criminal Investigation. A federal grand jury indicted 16 people involved in an alleged foreclosure rescue scam on Feb. 28, which prosecutors said bagged $6.7 million from 47 homeowners, nearly all in California.

In the second case, a federal grand jury charged seven defendants on March 13 in connection with an alleged equity-stripping scheme that netted $5.9 million from 68 homeowners nationwide.

The leader of both nationwide scams is Charles Head, 33, of Los Angeles, Calif., who targeted distressed homeowners, fraudulently obtaining the titles to over 100 homes. He also stole millions of dollars through fraudulently obtained loans and mortgages.

The scam

Prosecutors said victims believed that they were making rental payments to “investors,” whom they agreed to add to the title of their home. The victims of the schemes were in the process of getting foreclosed on, and were offered thousands of dollars up front to pay mounting bills and were led to believe they would eventually get their homes back. The “investors” were actually straw buyers who often replaced homeowners on the title.

After taking out a new mortgage to extract the home’s equity, the defendants would sell the victims’ home, stop making the mortgage payments, or begin eviction proceedings against the victims, prosecutors said. Head received approximately 97 percent of the stolen equity, while his “sales agents” and employees would receive either the remaining three percent of the equity or a salary from the fraudulently obtained funding.

The scams initially began with recruiting friends and family members as straw buyers, but the defendants started to recruit strangers through the Internet. They also used referrals from mortgage brokers to identify and solicit new victim homeowners. Beyond advertising on the Internet, the defendants would send “blast faxes” to mortgage brokers throughout the country and generate mass e-mails to potential victims. Through misleading and omitted information, scam victims were offered what appeared to be their last best chance to save their homes.

Head and his cohorts face charges that include mail fraud, the conspiracy to commit mail fraud and the conspiracy to commit money laundering. If convicted, they can face between 10 to 30 years in prison.

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