Feds Bust Mortgage Fraud Ring

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Federal authorities in Sacramento say they've broken up a mortgage fraud scheme that cost more than 100 people their homes. The majority of the victims were California homeowners facing foreclosure. KPCC's Julie Small reports.

Julie Small: Federal prosecutors announced 19 indictments, with 33-year-old Charles Head of La Habra as the lead defendant. The charges include bank fraud, mail fraud, and conspiracy. U.S. Attorney McGregor Scott says Head ran the scheme out of his Orange County business, Head Financial Services.

McGregor Scott: Mr. Head and his co-conspirators would identify homeowners near foreclosure, offer to bail them out of their financial dilemma, fraudulently obtain title to the property, and then finally, remove all the equity from the home through fraudulent mortgages.

Small: Scott says Head and his associates ran the scam on more than 100 properties across the country, and took in nearly $13 million. Some homeowners didn't realize they'd been conned until they got an eviction notice – or a call from the U.S. Attorney's office.

Ellen Endrizzi: We had to tell victims they didn't own their homes.

Small: Ellen Endrizzi is prosecuting the case. She says many of the fraud victims were already struggling with medical bills, or with unwieldy subprime loans.

Endrizzi: We had the elderly. We had the young. It went across gender lines, racial lines. These were just basically people who were desperate, and they saw this as the last ditch effort, and Head was counting on that.

Small: And counting on the public trust in government. The agents knocking on the victims' doors were licensed by the California Department of Real Estate. Commissioner Jeff Davi says his office audits and revokes hundreds of licenses a year. But he says sometimes, bad apples slip through. Davi's advice? Before you sign a contract, show it to an accountant, or an attorney. And even though you might be in a money squeeze, stay cool.

Jeff Davi: A lot of people have gotten into trouble, and then they're looking for any solution in these desperate times. And don't take something that's bad and make it worse. You just have to stop and say, "What exactly is being proposed here?" Sometimes if it is too good to be true, it is.

Small: If convicted, Charles Head and the others could serve decades in federal prison. That won't help the people who lost their homes, but U.S. Attorney McGregor Scott thinks news of Head's indictment could prevent more people from becoming victims. Scott says mortgage fraud is the fastest growing type of consumer fraud in the nation – and he says Californians are a prime target.