After falling behind on their house payments, Eleuteria and Arthur Washington of Redlands responded to a flier they got in the mail promising to help them renegotiate their mortgage.
What happened next, says the California attorney general's office, was an example of the kind of mortgage scam that has become rampant amid rising foreclosures.
According to a criminal complaint filed in San Bernardino County Superior Court, the Washingtons gave more than $6,000 to a group that claimed it would help them renegotiate the mortgage with their lender.
The Washingtons heard nothing more from the group, the complaint said, and learned later from their lender that the terms of their loan had never been changed.
The couple's experience was cited when the state attorney general's office announced this week that it had filed criminal charges against eight people in connection with an alleged mortgage scam run by a fictitious company known as First Gov, also called Foreclosure Prevention Services.
Bank records indicate that homeowners were bilked of more than $700,000, although state investigators could not estimate the number of alleged victims.
"It's a rising issue just because the sheer volume of foreclosures has grown, so the number of scams has grown alongside it," said Dana Simas, a spokeswoman for the attorney general's office.
Simas said state officials began getting complaints about the alleged fraud in January. She said the alleged fraud ring mailed fliers to hundreds of homeowners offering to renegotiate mortgages, reduce monthly payments and transfer delinquent loan amounts to the revised loan.
They charged a fee of $1,500 to $5,000, and told their victims to stop making mortgage payments and avoid communicating with lenders, Simas said.
When homeowners complained that they were still getting foreclosure notices, First Gov would say that the loans had been renegotiated but that the homeowners still needed to make a "good-faith payment" to accounts with names like "Reinstatement Department" or "Resolution Department," the attorney general's office said.
Group members kept payments in multiple accounts at multiple banks, Simas said. When authorities seized the accounts, they learned that most of the money had been wired to Mexico, she said, adding that authorities hope some of the remaining balance can be returned to the victims.
The 39-count complaint includes felony charges of grand theft, money laundering and conspiracy.
