Home scam suspected

The FBI is investigating a suspected "foreclosure rescue" fraud that may have cost as many as 256 homeowners title to their property and stripped them of their equity.

The alleged scam includes at least seven Sacramento homeowners and 61 statewide, and the probe is based in the Sacramento FBI office, according to court documents, interviews and an Internal Revenue Service search warrant obtained by The Bee.

An additional 100 investors who believed they were helping people on the brink of foreclosure also may have been swept up in the alleged scheme, with many having their credit ruined.

No charges have been filed in the case and the man at the center of the probe – Charles C. Head – denied any wrongdoing to The Bee, saying he has been the subject of an overzealous two-year investigation by federal agents.

But federal authorities say the matter has evolved into money laundering, and Head says the FBI has seized cash and exotic vehicles from him.

"We're still reviewing the evidence we got from searches in Los Angeles," Sacramento FBI spokesman Steve Dupre said. "We're still attempting to identify more victims and put the pieces together."

Kevin Carlin, a New Jersey attorney who says he has talked to 70 victims and filed a lawsuit in the case, said the fraud targeted people from Hawaii to New York who were on the brink of foreclosure. Victims' losses range from $40,000 to $400,000, Carlin said.

Such homeowners were referred – often by legitimate mortgage brokers – to Costa Mesa-based companies operated by Head, according to Carlin's suit filed in court in New Jersey.

Homeowners were told they could sign their house over to a trust and live there while repairing their credit, Carlin said. They would pay monthly rent to Head's companies and, after a year or two, could buy back their home at about the same price, he said.

Carlin said Head's companies also recruited third-party "straw lenders" or investors, who were told they could lend their good credit to people facing foreclosure by assuming ownership of the homes. In return, they allegedly were told they could earn $5,000 to $40,000 in a year or two.

The investors were told they didn't have to make mortgage or tax payments because Head's companies would pay the mortgages, Carlin said.

But the investors found out the mortgages had not been paid when they started getting default notices in the mail, he said.

Head, reached by e-mail, wrote that allegations and falsehoods are being spread by "a few disgruntled customers."

"This has little to nothing to do with me and the FBI/IRS has made no progress on this case at all," Head wrote. "It's been over 2 years without a single charge … ."

Many of the homeowners were notified by the FBI that they were victims and eventually evicted. The IRS search warrant lists affected properties in Sacramento, North Highlands and Roseville.

Sheila Jones is a Sacramento woman who said she called one of Head's companies on the suggestion of her cousin's mortgage broker.

Jones, who works for a nonprofit that serves disabled people, said she was desperate, recovering from a divorce and trying to pull together money to keep her son in private college in North Carolina.

The company sent a notary to her home. Jones said she signed a thick stack of papers, received $5,000 and began to pay rent on the south Sacramento home she purchased in 1997.

"They came in like the knight in shining armor," Jones said in the dining room of a duplex she now rents after being evicted from her home last year. "I was leery, but they were the answer to my prayer."

Willie Baker, who grew zucchinis and tomatoes in the garden behind his brick home in North Sacramento, faced the same fate.

Baker said he and his wife, who were also divorcing, sought last-minute help as foreclosure loomed.

He said he paid rent until the company he was paying "went up in smoke." Then, the FBI taped a note to his wrought-iron fence informing him of the ongoing investigation. Months later he was evicted.

"It just gets me so irate my blood boils," he said.

Head is named in a letter given to Baker and other alleged victims, informing them that they are entitled to proceeds from the FBI seizure of an $88,000 Mercedes Roadster in Miami Beach.

Head wrote in an e-mail that agents also seized his sister's Ford Expedition, his collection of Ducati motorcycles and cash.

"They even had a seizure warrant for 250,000 cash they saw that I withdrew from a bank in Miami," Head wrote. "It's amazing that this is happening in America."

The Sacramento FBI office is working the case as it continues to sort through 2,000 reports of suspected mortgage fraud from 2007 – a fourfold increase over the 500 similar reports in 2005.

Last month in the Sacramento region, nearly as many homes were lost in foreclosures as the 1,815 sold to new buyers, spurring experts to warn people to avoid scammers. Homeowners facing foreclosures should spurn solicitations and instead call their own mortgage company, private attorneys and housing aid organizations say.

Experts in mortgage scams say the sky-high prices of a couple years ago tempted many "equity-stripping" scammers to siphon the inflated values out of homes. And even though the victims faced foreclosure, it's impossible to know whether they might have salvaged their homes or some equity if they had sought better help, said Elizabeth Renuart, an attorney with the Boston-based National Consumer Law Center.

"That option was shut off to them because someone stole it from them," said Renuart, who wrote a report about equity-skimming scams in 2005.

Now that prices are back down, new frauds have emerged targeting people facing foreclosure. These scams describe rescue services, take money and do nothing, said John Davis, a housing attorney with Legal Services of Northern California.

"It's a shame," he said.

About the writer:

• Call The Bee's Christina Jewett, (916) 321-1201.