Charles Head,Jeremy Michael Head ,charged them with mortgage fraud

Scott O'Briant, special agent in charge of IRS Criminal Investigation, said the Head case should serve as a warning to homeowners looking for a quick way out of mortgage problems. O'Briant said homeowners should be wary of any promises of new mortgages or lower monthly payments."As the saying goes, if it sounds too good to be true, it probably is," O'Briant said.FBI and IRS together with other agencies have formally placed charges of running foreclosure rescue scams on 19 persons based out of South California. The agencies, working on an operation code-named Operation HomeWrecker, arrested Charles Head of La Habra and Jeremy Michael Head of Huntington Beach along with 17 others and charged them with mortgage fraud.The arrested individuals were working for a company owned by Charles Head called Head Financial Services and are said to be related to him. They are said to have cheated poor home owners facing foreclosure by offering them a way out.This is how they allegedly ran the scamThey are said to have contacted people listed with foreclosure of their loans. They would offer the home owners a way out, typically days before their eviction. The home owners would be asked to add another person in the title of their property.They explain that the new person, who is an associate, is an investor who was willing to take over the mortgage and pay the loan out on behalf of the house owner. The owners, meanwhile, could continue to live in their homes by this arrangement. In return, they would be asked to pay rent to the investors. This generally is lesser than their loan installments making the offer seem more lucrative for the poor borrowers.Then the company would take out fresh loans against the property without the knowledge of the original owner. After making payment for the loan for a few months, they allow the new loan to foreclose by not continuing with the payments. After foreclosure, they take over the remaining equity of the homes. The original owners would be left with neither a home nor the equity that they had built up over the years.Scam, just the tip of the iceberg, believe expertsLaw enforcement agencies warn that there might be more scams operating in the country. They have asked people who have availed of home loans to be especially careful of them. They are concerned that professional from the industry might be misusing their knowledge and skills for illegal gain.
Ill-informed and helpless people might end up being their victims. They may fall for such scams as the last resort. Operation HomeWrecker was launched to prevent this by uncovering financial bungling in the real estate industry. Charles Head of La Habra. He and 18 others face allegations that they preyed on homeowners who were struggling to make payments on adjustable-rate and other mortgages.
Under the scam, homeowners facing foreclosure were promised lower house payments and even cash upfront to help pay bills if they agreed to add another name to their home's title, prosecutors said. The victims were led to believe they were paying rent to the investor while they got their finances back in order, prosecutors added.
According to the unsealed indictments, Head and the others actually used the scheme to switch the names on the titles, take control of the homes, refinance them and walk away with whatever equity homeowners had built up.
Head faces charges of money laundering, mail fraud and conspiracy. If convicted, he could be sentenced to up to 20 years in prison. The other defendants, including his friends and members of his family, face up to 15 years behind bars.
Head is in federal custody in Southern California awaiting extradition to Sacramento and does not yet have a lawyer, said U.S. Attorney McGregor Scott.
Prosecutors said additional indictments are likely as they continue investigating the brokers, loan officers and banks that did business with Head Financial Services.
"The issue of mortgage fraud has become a major national legal and economic problem," Scott said during a news conference announcing the indictments. "We here in the Central Valley of California have experienced the problem firsthand as record numbers of homes go into foreclosure, in large part due to fraudulent activities."
Scott said so-called "foreclosure rescue" schemes such as the one Head is accused of orchestrating compound problems stemming from lending practices that have put many families into homes they could not afford to begin with, Scott added.In all, prosecutors said Head defrauded 115 financially strapped homeowners in 22 states of at least $12.6 million. The fraud began in 2004 as the red-hot housing market peaked and continued through 2006 as homeowners began facing ballooning payments on adjustable-rate and interest-only loans, according to prosecutors.
The victims were not identified in the indictments, but Assistant U.S. Attorney Ellen Endrizzi said they ranged from first-time home buyers to the elderly.
About 90 percent lost their homes, she said. Others were able to keep their homes but were left with even more debt and credit problems, she added.
Usually victims had fallen into dire financial straights after adjustable mortgage rates reset at much higher monthly payments. Sometimes, however, victims were longtime homeowners with as much as $400,000 in home equity that were convinced to go along with the Head proposal after finding themselves unemployed or facing large medical bills, prosecutors said.If there was a common theme among the victims, Endrizzi said, they were all "people who were desperate and seeing this as a last-ditch effort and were counting on that," she said.Head's alleged scheme was detailed in two indictments made public on Monday.
The first said the 33-year-old Head and other conspirators recruited friends and family members to act as straw buyers for homes beginning in 2004. Sometimes as many as five homes were refinanced in one family member's name, according to the indictment.
The second indictment alleged that when Head and other defendants needed more money to keep the scheme afloat, they branched out nationwide, soliciting strangers through the Internet and using referrals from mortgage brokers to identify additional victims, the indictments said.
Head and others operated Web sites, including FundingForeclosure.com and $30kperyear.com, that attracted people willing to let the defendants use their names and credit histories to buy homes. In exchange, these buyers were paid thousands of dollars, but they soon began receiving notices that the mortgages were not being paid, the indictments said.
Head and other defendants carried out the scam under multiple business names, including Creative Loans LLC and Dynasty Realty Group, according to the indictments.