Southern California Loan Modification Scam Used Complicated Money Trail With $1M+ Flowing Into Mexico, Says State AG

In Southern California, the Los Angeles Times reports on an alleged loan modification scam which, according to authorities, is among the most sophisticated operating in California, that stymied investigators with a thicket of bank accounts, 1-800 numbers and wire transfers to Mexico until they finally busted the operation in October.

• The California attorney general's office had been fielding complaints for months from homeowners who had fallen victim to what one prosecutor termed a "brilliant scheme." Representatives of this operation allegedly induced homeowners to send them as many as three consecutive mortgage payments. More than $1 million flowed through a series of bank accounts, much of it eventually crossing the border to banks in Mexico, according to the attorney general's office.

• In some cases, people lost their homes because they did nothing to head off foreclosure, believing they had made a deal with their bank. Despite there being hundreds of victims, investigators found the trail confusing. The operation did not register its phone lines in its own name. Instead, investigators said, its 800-numbers ran through Internet phone companies. It was the same with the bank accounts.

• [Investigators] began working backward from the accounts where checks were deposited and postal boxes where victims sent their money. They determined that much of the money seemed to go to Juan Jose Perez and Isuara Hernandez, a married couple with three children who had recently lived in San Bernardino County. On Oct. 27, the attorney general's office filed a 39-count complaint charging Hernandez, Perez and several associates with grand theft, money-laundering and conspiracy.(1) Five of Hernandez and Perez's associates pleaded guilty;(2) but Hernandez and Perez, who authorities say are the ringleaders, have eluded capture. Investigators suspect they went to Mexico.

For the story, see In California, mortgage scammers find easy pickings (As foreclosures climb, so does fraud by schemers preying on desperate homeowners hoping to modify their loans. State investigators have 750 open cases -- up from just 10 a year ago).

(1) See California AG press release: Attorney General Brown Breaks Up Foreclosure Scam Ring.

(2) See California AG press release: Attorney General Brown Sends Perpetrators of Loan Modification Fraud to Prison.