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Houses Stolen in Mortgage Fraud, Indictments Allege •
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"Mortgage Rescue" Scams Hit Close to Home
By Pierre Thomas, Jack Date and Theresa Cook
ABC News
Monday 24 March 2008
Authorities report a spike in scams targeting
homeowners facing foreclosure.
As the mortgage crisis continues to unfold, the FBI says incidents of suspicious
financial activity banks reported to the bureau has skyrocketed, jumping from
28,000 cases in 2005 to 48,000 last year.
Among the factors fueling this two-year, 71 percent increase is a spike in
scams targeting citizens facing foreclosure, one of which is known as the "home
foreclosure rescue scam."
Watch "World News with Charles Gibson" TONIGHT at 6:30 p.m. ET for
the full report.
It's a familiar story, according to state and federal authorities, as well
as homeowners interviewed by ABC News. In the scheme, predatory con artists
promise financially strapped homeowners a lifeline, but it's a ruse. Sometimes
they charge a fee and then disappear. And sometimes they push homeowners over
the cliff into financial ruin.
Pamela Fowler, 49, found herself in such a position after she bought her dream
home in Richmond, Va.
"The house was perfect," Fowler said, describing the four-bedroom
brick house she shared with her daughter. It had ample space for her arts and
crafts projects, a huge lot in a great location and "really good neighbors."
"I thought that was where we would spend the rest of our lives,"
she said.
But after a foot injury forced Fowler to leave her job with the State Police
for three months, the Navy veteran and single mom was in financial crisis, sliding
toward foreclosure.
With bills piling up, Fowler tried to refinance her home. Her bank said no.
Then a mortgage firm offered what appeared to be a way out.
"These people came to me as my guardian angels to save me and I listened
to them because I was desperate at that point in time," she said. "When
you reach a point to where you can't see the light at the end of the tunnel,
you think these people are gonna be your light."
But the people from the mortgage firm were no angels. Fowler says they told
her they would buy the house and let her live in it for a year - rent free -
until she could rebuild her credit and buy it back. She says she signed off
on their paperwork, but instead of honoring their agreement with Fowler, she
says they sold the house to another party and Fowler was forced out.
After the property was sold, Fowler says the mortgage company kept all the
equity out of the home. As part of the FBI investigation into the scheme, a
Virginia woman, Anna Essex Thorne, pleaded guilty to conspiracy to commit wire
fraud in connection with the mortgage documents she executed to buy the home.
Fowler's entire life savings, which was tied up in her home, is gone. She moved
to North Carolina, where she lives in a mobile home. Fowler hopes to someday
see the restitution money the defendant in the case is supposed to pay her as
part of the plea agreement.
"I worked hard my whole life. I came from poverty and I had achieved the
American Dream, and I feel they ripped it away from me," she said, tears
welling up in her eyes. "I mean they took my future, my daughter's future
& all that work, and now I feel like such a failure. I feel my whole life
has been a failure."
With more than two million Americans facing the possibility of foreclosure,
authorities say so-called rescue scams are on the rise.
Authorities say con artists are using the Internet, mailings and television
to prey on homeowners facing financial ruin in the mortgage crisis.
Jackie Felton, chief of the FBI's Economic Crimes Unit, acknowledges that "everyone
wants to be a homeowner," but that when those homeowners start to fall
behind in payments, they become vulnerable.
"And when these fraudsters come in and they take advantage of those people
who are in crisis mode, it's very disturbing," she said.
"It's unfortunate at that time when you are in crisis mode, most of us
panic and that's the worst time to actually try to make a decision," she
added.
And Felton doesn't believe the problem of mortgage scams is going to slow down
any time soon. "Across the country, as these market conditions continue,
I'm afraid we'll see more," she said.
To cope with rescue scams and other forms of mortgage fraud, the FBI has set
up 35 mortgage fraud task forces across the country. A number of states, including
California, Florida, Washington and Texas, have targeted firms exploiting homeowners
drowning in the volatile housing market.
"Our office has more than a thousand complaints and we have prosecuted
numerous companies dealing with thousands of people just here in the state of
Texas and I know that this has been replicated across the country," Texas
Attorney General Greg Abbott told ABC News.
"As they are facing one of the most challenging issues in their entire
lives, they are thrown a life preserver, in the form of foreclosure rescue,"
Abbott said. "And it turns out to be nothing more than an anchor that pulls
them under the tide and leads them to ruin.
"These scam artists that prey upon people who are going through the foreclosure
process are the worst of the worst," he added. "They are not only
robbing people of their money but they are robbing people of their dreams, which
is why we are so aggressively prosecuting these scam artists across the state
and country."
Fowler knows full well of the pain of losing her dream, and says she hopes
other homeowners don't fall for the same kind of scheme she did.
"Don't believe it," she said. "No one's gonna come rescue you.
Do not depend on somebody else to come in and rescue you, because they're not
gonna rescue you; they're gonna take what you have. They will take advantage."
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Houses Stolen in Mortgage Fraud, Indictments Allege
By Marc Lifsher and E. Scott Reckard
The Los Angeles Times
Tuesday 25 March 2008
Federal prosecutors name 19 suspects in
a nationwide scam that left strapped homeowners without title to their houses
or without the equity they had built up.
Sacramento - Federal prosecutors Monday charged 19 individuals, mainly
from Southern California, with defrauding homeowners in trouble partly by using
"foreclosure rescue pitches" and an equity-draining technique called
equity stripping.
Two indictments made public Monday accused Charles Head, 33, of La Habra; his
brother, Jeremy Michael Head, 30, of Huntington Beach; and others of taking
part in a nationwide mortgage scam that stole $12.6 million and fraudulently
obtained the titles to more than 100 homes.
Prosecutors said they found victims of the mortgage scam in California, Oregon,
Washington state, Nevada and at least 14 other states.
Consumer advocates, who have been trying to help people with high-interest
sub-prime mortgages stay in their homes, said they hoped the federal criminal
indictments would scare would-be con artists out of the troubled market.
People who try to victimize strapped homeowners "are the worst of the
worst, the ultimate vultures, looking to mop up whatever is left from people
who have already been victimized," said Kevin Stein of the California Reinvestment
Coalition in San Francisco. "The more people are in despair, the more vulnerable
they are to the person who says, 'I'm here to help.'"
The defendants have been charged with fraud and conspiracy. They could face
fines and sentences of as much as 20 years in prison, prosecutors said.
Charles Head was being held without bond as a flight risk in Santa Ana, where
he appeared in federal court Friday, prosecutors said. His attorney did not
return a call seeking comment.
Jeremy Michael Head's court-appointed attorney, Christopher Haydn-Myer, declined
to discuss the case but described his client as making a modest living at an
auto maintenance shop. He said Head rides to work by bicycle because "he
doesn't even own a car."
John Balazs, an attorney for defendant Joshua Coffman, 29, of North Hollywood,
said his client would plead not guilty to any role in the alleged conspiracy.
"This case is not anywhere near as clear-cut as the government makes it
sound in their papers," Balazs said. "Some of these people in fact
did manage to keep their homes."
Additional charges are expected to be filed in a widening probe, said Assistant
U.S. Atty. Ellen Endrizzi.
Focus on "Insiders"
The investigation, dubbed Operation Homewrecker, involved the FBI and the Internal
Revenue Service and focused on real-estate-related financial crimes, which have
become a top priority, said McGregor W. Scott, the U.S. attorney for the Eastern
District of California in Sacramento.
Drew Parenti, FBI special agent in charge, said his agency was "focusing
on the industry professionals, the 'insiders' who have manipulated the mortgage
loan process for their own financial gain."
Reports of mortgage fraud, including foreclosure-avoidance fraud, have surged
as the end of rising home prices has exposed widespread corruption that accompanied
the housing boom.
Financial institutions are on pace to file 60,000 suspicious-activity reports
involving mortgage fraud this year, up from 28,000 in 2005, said FBI spokesman
Stephen Kodak in Washington.
The bureau investigated 721 mortgage fraud cases in 205 and has 1,253 such
cases open at present.
Prosecutors in Sacramento said they originally learned about the alleged fraud
after receiving a complaint from a homeowner. They said a complex investigation
revealed that between Jan. 1, 2004, and March 14, 2006, Head and his associates
contacted desperate homeowners, offering to assist them in avoiding foreclosure
and to cash out equity in their homes to pay bills.
One variation of the alleged fraud, they said, involved adding a so-called
investor or "straw buyer" title to a property and requiring homeowners
to pay "rent" that was lower than their original monthly mortgage
payment. Prosecutors said Charles Head and his associates would sell the home
after extracting all available equity.
Homeowners, in the process, lost their property.
Civil Complaint
Prosecutors didn't release the names of any victims Monday, but a civil case
provides a window on the disputes involving Charles Head and his alleged associates.
In a fraud lawsuit filed in August 2005 in Los Angeles County Superior Court,
Pamela Graham accused the Head brothers and other defendants of deceiving her
into selling her Los Angeles home, which she thought she was refinancing.
Graham responded to a mailer touting Head Financial Services' ability to "find
solutions" for homes in foreclosure. Jeremy Michael Head visited her at
home, Graham said, and promised her she would get cash back and lower her mortgage
payments if she refinanced the home with him.
Graham said she later discovered that despite repeated assurances to the contrary,
ownership of the home had been transferred to another woman who had been described
to her as an investor in the deal.
Graham's signature was forged on the deed of trust transferring ownership,
the suit alleged.
According to filings in the case, the defendants settled by agreeing to transfer
the property back to Graham.
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marc.lifsher@latimes.com
scott.reckard@latimes.com
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