Christy Romero, the special inspector general with the Troubled Asset… (Bloomberg )
Federal prosecutors have accused a Northern California man of running a foreclosure rescue scheme in which he exploited bankruptcy laws to delay home seizures by lenders.
Authorities have grown increasingly concerned about schemes aimed at homeowners in foreclosure because, they say, these types of scams can prevent borrowers from getting legitimate assistance with their foreclosures.
A federal grand jury indicted Walter Bruce Harrell of Montara -- roughly 20 miles south of downtown San Francisco -- on charges of bankruptcy fraud and two counts of making false statements in bankruptcy court. The indictment accuses Harrell of defrauding lenders that were trying to foreclose on homeowners.
The indictment was announced by the special inspector general for the Troubled Asset Relief Program, a federal office created to oversee the program commonly known as the 2008 bank bailout. TARP is involved because the creditors trying to foreclose on the home -- institutions that were not named in court documents -- have received federal funds under that program.
“Harrell is charged with exploiting TARP banks and preying on vulnerable homeowners by promising to delay their foreclosures for a monthly fee,” Christy Romero, the special inspector general, said in a news release.
The indictment alleges that Harrell arranged for homeowners to grant fractional interests -- 2% to 20% -- of their properties to people who worked for Harrell. It alleges that those employees of Harrell then filed for bankruptcy, which allowed them to temporarily stop the foreclosures using the automatic stay provisions in bankruptcy. This stay blocks creditors in a bankruptcy case from collection actions such as foreclosures, but such a measure is often temporary because banks can petition a Bankruptcy Court to be released from the stay.
Harrell, 71, could not be reached for comment. Candis Mitchell, the federal public defender assigned to his case, declined to comment other than to say Harrell planned to plead not guilty. He was arrested Wednesday and released on a $50,000 bond, authorities said.
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