CA Prosecutors Indict 19 in Mortgage Fraud Scheme

By: Aaron C. Davis
By: Aaron C. Davis

SACRAMENTO (AP) - Federal prosecutors on Monday announced
indictments in a mortgage scheme they say victimized more than 100
homeowners and siphoned off nearly $13 million in home equity.

Dozens of people in California and elsewhere lost their homes in the scam, which prosecutors said was led by Charles Head of La Habra. He and 18 others face allegations that they preyed on homeowners who were struggling to make payments on adjustable-rate and other mortgages.

Under the scam, homeowners facing foreclosure were promised lower house payments and even cash upfront to help pay bills if they agreed to add another name to their home's title, prosecutors said. The victims were led to believe they were paying rent to the investor while they got their finances back in order, prosecutors added.

According to the unsealed indictments, Head and the others actually used the scheme to switch the names on the titles, take control of the homes, refinance them and walk away with whatever equity homeowners had built up.

Head faces charges of money laundering, mail fraud and conspiracy. If convicted, he could be sentenced to up to 20 years in prison. The other defendants, including his friends and members of his family, face up to 15 years behind bars.

Head is in federal custody in Southern California awaiting extradition to Sacramento and does not yet have a lawyer, said U.S. Attorney McGregor Scott.

Prosecutors said additional indictments are likely as they continue investigating the brokers, loan officers and banks that did business with Head Financial Services.

"The issue of mortgage fraud has become a major national legal and economic problem," Scott said during a news conference announcing the indictments. "We here in the Central Valley of California have experienced the problem firsthand as record numbers of homes go into foreclosure, in large part due to fraudulent activities."

Scott said so-called "foreclosure rescue" schemes such as the one Head is accused of orchestrating compound problems stemming from lending practices that have put many families into homes they could not afford to begin with, Scott added.

In all, prosecutors said Head defrauded 115 financially strapped homeowners in 22 states of at least $12.6 million. The fraud began in 2004 as the red-hot housing market peaked and continued through 2006 as homeowners began facing ballooning payments on adjustable-rate and interest-only loans, according to prosecutors.

The victims were not identified in the indictments, but Assistant U.S. Attorney Ellen Endrizzi said they ranged from first-time home buyers to the elderly.

About 90 percent lost their homes, she said. Others were able to keep their homes but were left with even more debt and credit problems, she added.

Usually victims had fallen into dire financial straights after adjustable mortgage rates reset at much higher monthly payments. Sometimes, however, victims were longtime homeowners with as much as $400,000 in home equity that were convinced to go along with the Head proposal after finding themselves unemployed or facing large
medical bills, prosecutors said.

If there was a common theme among the victims, Endrizzi said, they were all "people who were desperate and seeing this as a last-ditch effort and were counting on that," she said.

Head's alleged scheme was detailed in two indictments made public on Monday.

The first said the 33-year-old Head and other conspirators recruited friends and family members to act as straw buyers for homes beginning in 2004. Sometimes as many as five homes were refinanced in one family member's name, according to the indictment.

The second indictment alleged that when Head needed more money
to keep the scheme afloat, he branched out nationwide, soliciting strangers through the Internet and using referrals from mortgage
brokers to identify additional victims, the indictments said.

He set up Web sites, including FundingForeclosure.com and $30kperyear.com, that attracted people willing to let Head use their names and credit histories to buy homes. In exchange, these buyers were paid thousands of dollars, but they soon began receiving notices that the mortgages were not being paid.

Head and other defendants carried out the scam under multiple business names, including Creative Loans LLC and Dynasty Realty
Group.

Scott O'Briant, special agent in charge of IRS Criminal Investigation, said the Head case should serve as a warning to homeowners looking for a quick way out of mortgage problems. O'Briant said homeowners should be wary of any promises of new mortgages or lower monthly payments.

"As the saying goes, if it sounds too good to be true, it probably is," O'Briant said.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


KOLO-TV 4850 Ampere Drive Reno, NV 89502
Copyright © 2002-2014 - Designed by Gray Digital Media - Powered by Clickability 16970171 - kolotv.com/a?a=16970171
Gray Television, Inc.