Houses stolen in mortgage fraud, indictments allege
Federal prosecutors name 20 suspects in an alleged nationwide scam that left financially troubled homeowners without title to their houses or without the equity they had built up.
SACRAMENTO -- Federal prosecutors today charged 19 individuals mainly from Southern California in an alleged nationwide mortgage scam that stole $12.6 million and fraudulently obtained the titles to more than 100 homes.
Two related criminal indictments accused Charles Head, 33, of La Habra, and others with targeting homeowners in financial trouble. The suspects allegedly utilized two real estate scams: the first involving a "foreclosure rescue" pitch and the second using an "equity stripping" technique that distributed e-mails and "fax blasts" to brokers who sought help in finding potential victims having trouble meeting mortgage payments.
The defendants have been charged with conspiracy to commit mail fraud and conspiracy to commit money laundering and other offenses. They could face fines and prison sentences of up to 20 years in prison, prosecutors said.
Foreclosure: An article in Tuesday's Business section about federal prosecutors breaking up an alleged nationwide mortgage fraud ring said Pamela Graham of Los Angeles contended in a lawsuit that her signature was forged on a deed of trust that transferred ownership of her home. The ownership actually was transferred through a second document -- a grant deed -- on which her signature also was forged, the suit alleged.
The investigation, dubbed Operation Homewrecker, involved the Federal Bureau of Investigation and the Internal Revenue Service and focused on real estate-related financial crimes, which have become a top priority for federal law enforcement, said U.S. Atty. McGregor W. Scott.
Charles Head was being held without bond as a flight risk in Santa Ana, where he appeared in federal court on Friday, Asst. U.S. Atty. Ellen Endrizzi said. Head was being represented by Ann Hwong of the federal public defender's office in Orange County, who did not immediately return a call seeking comment.
FBI Special Agent in Charge Drew Parenti said his agency is "focusing on the industry professionals, the 'insiders' who have manipulated the mortgage loan process for their own financial gain."
According to prosecutors, Head and his associates offered financially strapped homeowners two options to avoid foreclosure and to cash out equity to pay bills. If the homeowner did not qualify for the first option -- and few did -- a so-called investor, to "straw buyer," would be added to the title of the property, and homeowners would be required to pay a "rent" that was lower than their original monthly mortgage payment.
"Once the straw buyer had title to the home, the defendants immediately applied for a mortgage to extract the maximum available equity from the home," prosecutors said. "When the defendants ultimately would sell the home, stop making the mortgage payment and/or pursue an eviction proceeding, the victim homeowner was left without their home equity or repaired credit."
The second scam also went after distressed homeowners but recruited strangers over the Internet with credit repair proposals. The victims would end up losing their homes and their equity, prosecutors said.
The names of the victims were blacked out in the federal indictments. They also were removed in search-warrant materials that were to be released publicly later in the day, said federal prosecutor Endrizzi. She predicted additional charges would be filed in the widening probe.
"We're not done yet," Endrizzi said.
marc.lifsher@latimes.com
scott.reckard@latimes.com
