Howard Brown and his family felt panicked and desperate. They were behind on their mortgage payments, and they had just learned that their three-bedroom house in Wilmington was being foreclosed on. They did not know where to turn.
Then, a nice young man appeared in the driveway. Well-dressed and pleasant, he told Brown he was a Christian. He said he could help save Brown's home.
All Brown had to do was sign documents that would allow Brown to arrange for someone to temporarily "share" title to his property. With someone else's name on the title along with his, Brown could refinance and also improve his credit. Then, once his credit was repaired, he would get sole title back.
Brown signed. "He seemed like he was honest," the legally blind Korean War veteran said.
And that's when his real troubles began. With mounting horror, he and his family came to realize that they had signed over title to their home to a man they had never heard of. It also became clear that they were now on the hook not only for their original loan of about $160,000 but also for about $150,000 in new debt borrowed against the house without their knowledge.
Then the family began getting notices that the property was going to be put up for auction.
Foreclosure fraud is a relatively simple crime. Once a property owner misses two or three monthly payments, a lender routinely files a notice of default with the county recorder's office. That public document is a precursor to formal foreclosure, and all a scam artist has to do to find victims is read the notices, descend on the homeowners and trick them into signing over title to their homes.
It is a crime that consumer advocates fear could become increasingly common -- especially in Southern California, where many homeowners have stretched themselves to their financial limits to afford the region's record high housing prices.
"The scammers don't create the foreclosure rates, but they swoop in at the time that someone is in distress," said Elizabeth Renuart, a staff attorney with the National Consumer Law Center in Boston and the author of "Dreams Foreclosed: The Rampant Theft of Americans' Homes Through Equity-Stripping Foreclosure 'Rescue' Scams."
While still considered low, indications are that the nation's foreclosure rate is on the rise, meaning the pool of potential victims is growing. Overall, the foreclosure rate in the Los Angeles region has doubled since October, according to RealtyTrac Inc., an Irvine-based company that monitors foreclosures. As of February, the rate was one foreclosure for every 1,223 households.
At the same time, the steep rise in housing prices over the last few years has created a massive amount of equity in many properties -- a tempting target for swindlers.
The average value of a house in Wilmington, where the Browns live, has more than doubled over the last five years, rising from $155,000 in 2000 to $395,000 last year, according to DataQuick Information Systems, a real estate research firm in La Jolla. Similar jumps were recorded across Los Angeles County.
"There's so much equity in houses, if you're going to do white-collar crime, you only have to rip off 10 people to become a millionaire," said Debra Zimmerman, an attorney at Los Angeles' Bet Tzedek legal services who specializes in real estate fraud and elder abuse. She said she has seen a "dramatic" rise in victims of foreclosure fraud in Los Angeles County in the last few months.
"I am getting three cases a week," she said. "I used to get none." Attorneys at the Legal Aid Foundation of Los Angeles also report jumps.
Across the country, law enforcement officials also are grappling with the crime. Colorado's attorney general, John Suthers, is pushing a law that would tighten rules for brokers after a rash of scams in that state. Minnesota passed new rules in 2004, Maryland in 2005.
California actually has some of the nation's strictest regulations, but advocates say that does not stop all scam artists. And homeowners in the state could be particularly vulnerable because so many have nontraditional loans such as adjustable rate mortgages that send payments spiraling upward with rising interest rates after a fixed period. Real estate experts said many of those payments are set to begin rising this year.
Already, advocates say they are seeing a corresponding rise in fraud victims.
"We are just seeing more and more of it," said Dan Grunfeld, president and chief executive of Public Counsel, a Los Angeles pro bono law office that tries to help victims -- including the Brown family -- reclaim title to their houses or at least escape the crushing debt that many are left with after scam artists have drained the properties' equity.