Janie Torres thought she was getting help from her friendly neighborhood real estate agent. Instead, she lost her home -- becoming an apparent victim of a form of fraud spreading across California's Central Valley as the mortgage crisis deepens.
From phony foreclosure consultants who take thousands of dollars in illegal prepayments and then do nothing, to real estate agents offering complicated rescue schemes that take away people's homes, mortgage scammers are increasingly active, law enforcement and real estate officials say.
Schemes range from homeowners being defrauded by phony foreclosure "rescue" services -- Tulare County prosecutors have accused one woman of defrauding more than 200 people across the state -- to nationwide schemes, like one described in a federal indictment unveiled last month in Sacramento.
And while some alleged scammers are now facing criminal prosecution, it's likely many more cases have yet to surface, law enforcement officials say.
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"People should be very aware and on their alert against these foreclosure scam artists in the Central Valley," said California Attorney General Jerry Brown, whose office is investigating cases of suspected fraud with prosecutors in Tulare and Merced counties. "It's a serious problem."
Still, as falling home prices and unaffordable mortgages put more central San Joaquin Valley residents under the threat of foreclosure, the current level of complaints may be "just the tip of the iceberg," Brown added.
Don Gallian, assistant district attorney with the Tulare County District Attorney's Office, said foreclosure scammers seek out people in desperate straits, often elderly people or those who lack access to sound financial advice.
Unfortunately, he said, "people who are desperate often make decisions they should not make."
Torres, a 63-year-old homeowner in Armona, wishes she had made a different decision last year. That's when she and her husband went to a Hanford-based mortgage broker to ask for help finding a home-refinance loan to pay her husband's way to Mexico to care for his aging father.
But the papers they signed actually turned over ownership of their home of eight years to a woman Torres said she believes is the broker's girlfriend. Torres said she found out last month only after she found his business vacant and her phone calls unreturned.
"There's no telling how many people they took in like this, or how much money they made," said Torres, who planned to refer her case to the Kings County Sheriff's Department.
Torres' case, if it does rise to the level of fraud, is just one example of scams currently targeting homeowners, said Tom Pool, spokesman for the California Department of Real Estate.
Others include stripping equity. Pool said the practice became common when rising house prices allowed homeowners to pull money from their homes through refinancing loans.
Federal prosecutors last month accused Charles Head of La Habra and 18 others of just such a scam. The indictments by U.S. Attorney McGregor Scott last month allege that Head and his associates presented people on the edge of foreclosure with an opportunity to keep their homes by paying rent to one of Head's property management firms, with the promise that those firms would keep up on the mortgage payments.
Instead, prosecutors allege, Head and his associates would give homeowners complicated paperwork that actually transferred ownership of the home to a "straw buyer," who would then refinance the homes to draw out tens of thousands of dollars of equity, leaving the victims worse off than before.
More recently, Pool said, that scam has fallen out of favor. The collapse in the residential real estate market, combined with the large number of new homeowners who took out mortgages with little or no money down, have led to lots of homeowners with little or no equity in their homes, he said.
"What you're going to see popping up now are, first of all, the knocks on the door" by phony foreclosure "consultants" who read publicly listed notices of default on mortgages and ply troubled homeowners with sales pitches, he said.
Pool said legitimate foreclosure consultants help homeowners negotiate with mortgage lenders. But a legitimate consultant won't ask for money in advance, he said, because that's almost always against the law.
"If someone offers to help, but wants their money up front, that's a huge red flag," Pool said.
The Tulare County District Attorney's Office has accused Rosa Maria Conrado, of San Bernardino, of perpetrating the scheme against more than 200 homeowners across the state, some of them in the Valley.
Conrado allegedly offered homeowners foreclosure consulting services, took advance payments of thousands of dollars and then never provided the services she promised, according to court documents.
Dwayne Johnson, an investigator with the Tulare County District Attorney's Office, said the office's real estate fraud unit has been "pretty busy" since it was first formed in March 2006, with about 40 complaints per year.
"Prior to that, we weren't really receiving any cases," he said.
The Conrado case has been referred to the California Attorney General's Office, which is investigating allegations of fraud in other counties.
"When it reaches the level of criminality, we start investigations and we seek to put people in jail," Brown said. But the state's top prosecution office also has brought actions against companies accused of pushing people into illegal loans.
In March, the office shut down six lending companies run by Southern California resident Eric Pony and his family members. The six companies -- Lifetime Financial, Nations Mortgage, Greenleaf Lending, Virtual Escrow, Olympic Escrow and Direct Credit Solutions -- were accused of lying about the low terms people could secure for mortgages, then switching paperwork to force them into monthly payments greater than their monthly incomes -- a sure route to foreclosure.
Johnson said the Tulare County District Attorney's Office also is working with the Fresno County District Attorney's Office on another investigation involving a suspected foreclosure rescue fraud in which illegal prepayments were made.
Sydney Ricks, deputy district attorney with the Fresno County district attorney's real estate fraud unit, said she could not comment on investigations.
But she agreed with Johnson that the number of suspected mortgage-related frauds being reported to her office has risen dramatically in recent months, "and I anticipate it's going to get worse."
That's because Ricks fears scammers are growing more sophisticated in their appeals to homeowners in trouble. Her office recently received a complaint from a homeowner who got documents in the mail that appeared to be from his mortgage lender. One demanded the homeowner "not accept any other offers," listing a phone number to call to work out a way to avoid foreclosure.
On closer inspection, however, the documents appeared to be forgeries directing the homeowner to call yet another foreclosure "consultant," one who may or may not be fraudulent, she said.
The best way for people to avoid being scammed is to seek help from a real estate professional or attorney, she said.
Pool of the state Department of Real Estate said people should also beware of any offers that appear to be too good to be true.
One sure warning sign, he said, is if a foreclosure "rescuer" asks a homeowner to sign over the deed of his or her home to get help.
"If they make promises that by deeding the property over you won't have to pay the mortgage anymore, that's generally not true," Pool said. After all, the homeowner who signs over the deed to the home is still the "owner" of the mortgage, and by signing over the deed, "you're just giving up your security," he said -- the home that serves as the loan's collateral.
Pool also warned of offers that allow a homeowner to stay in his or her foreclosed home and pay "rent" to the rescuer, who promises to take over the mortgage.
"If you acquire the deed for a property, and then turn around and collect rent on that property, part of the rent has to go toward the mortgage," he said. Otherwise, it's called rent skimming, and it's a crime, he said.
Often, there's not much law enforcement agencies can do to help victims regain money they've lost, said Gallian of the Tulare County District Attorney's Office.
"If property has been transferred as a result of fraud, that transfer can be set aside," he said. But "if people have lost money, the best we can do is get an order from the court seeking restitution." It's a long shot, he said, since many criminals don't hang on to their ill-gotten gains.
Still, "we need to make sure that people who do this are punished," he said.