F'closure Rescue Hit Parade Continues As Sacramento Feds Slam Four; Charges Describe Sale Leaseback Peddling, Equity Stripping, Rent Skimming Racket

In Sacramento, California, The Redding Record Searchlight reports:

• Three Redding residents have been indicted by a federal grand jury on mail fraud, money laundering and other charges, prosecutors with the U.S. Attorney’s Office announced Friday. Darrin Arthur Johnston, 45, Todd Allen Smith, 47, and Cheryl Ann Hitomi Peterson, 47, were indicted in what prosecutors described as a “foreclosure recovery” scheme in which homeowners in financial distress signed over the deeds to their homes. In exchange, homeowners were allegedly told they could lease their homes and buy them back in two years.(1)

• Prosecutors said that Jeremiah Andrew Martin, 32, of San Antonio, Texas, who was also indicted, as well as Johnston and Smith, allegedly kept the lease-rental payments instead of paying off the loans.

For the story, see Four charged in housing scheme.

For the indictment, see U.S. v. Martin, et al.

(1) The story describes the alleged racket as follows:

• According to the federal jury’s indictment, Martin, Johnston, and Smith allegedly marketed a “foreclosure recovery” program in which homeowners were convinced to sign over the deeds to their homes.The indictment states the “foreclosure recovery” program was based on their alleged false representations that the homeowners could lease them back for a low rent and that they would help them repair their credit. The homeowners believed they could buy the homes back after two years.

• After obtaining titles to the homes, however, prosecutors said, Martin, Johnston and Smith are alleged to have extracted equity from them by inflating their values and obtaining additional loans, keeping the rent payments rather than making payments to lenders, and then allowing the homes to be lost in foreclosure. Peterson, an escrow officer and notary, is alleged to have used her office and her notary status to lend the appearance of legitimacy to the scheme.