Tuesday, May 1, 2012

Sacramento Feds Score 3 Convictions Centering On Equity Stripping Racket That Peddled Sale Leaseback Ripoffs To High-Equity Homeowners In Foreclosure

In Sacramento, California, The Record Searchlight reports:

  • Two Redding residents indicted by a federal grand jury in 2010 for their roles in what prosecutors have described as a fraudulent foreclosure recovery scheme pleaded guilty [] in U.S. District Court, a spokeswoman with the U.S. attorney's office said. A Redding woman also indicted in the same case has rejected a plea bargain offer and is scheduled to stand trial next month.

  • Lauren Horwood, a spokeswoman for the U.S. attorney's office, said Darrin Arthur Johnston, 47, and Todd Allen Smith, 49, both of Redding, as well as Jeremiah Allen Martin, 34, of San Antonio, pleaded guilty Tuesday and are scheduled to be sentenced on Sept. 25. But she said the terms of the plea bargains, as well as the specific counts to which the trio admitted guilt, won't be released until then.

  • Prosecutors have said the alleged fraud scheme resulted in financially distressed homeowners signing over the deeds to their homes with the understanding that they could lease them and buy them back in two years. But, prosecutors have said, Johnston, Smith and Martin allegedly pocketed the lease-rental payments instead of paying off the loans.

  • Peterson, who was an escrow officer, used her notary status to give the appearance of legitimacy to the scheme, the federal indictment claims. Many homeowners lost their homes in the course of the alleged fraud, and lenders suffered losses in excess of $1 million, prosecutors have said.
  • According to the federal jury's indictment, the so-called foreclosure recovery program was based on their false representations that the homeowners could lease back their homes for a low rent and that they would help them repair their credit.

  • After obtaining titles to the homes, however, prosecutors said, Martin, Johnston and Smith allegedly extracted equity from them by inflating their values and obtaining additional loans, keeping the rent payments rather than making payments to lenders, and then allowed the homes to be lost in foreclosure.(1)
For the story, see Three plead guilty to federal charges in Redding foreclosure recovery scheme (Fourth person will stand trial next month).

(1) For more on this type of foreclosure rescue ripoff, see:

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