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"Operation Homewrecker" May Be Lowest Blow Of Housing Crisis

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AP

It doesn't get much sadder than the "funny business" I'm reporting today. More than a hundred homeowners in 23 states have lost their homes, not because they intentionally stopped paying their mortgages, but because the company which promised to help them instead may have robbed them blind.

Charles Head ran a financial services company in Orange County, California. He is now charged with being the ringleader in what a federal investigation has dubbed "Operation Homewrecker."

The alleged fraud worked like this: a homeowner in need would agree with Head or his representatives to have a third party put on the title in exchange for some cash upfront. The homeowner would then pay the third party rent that was lower than the mortgage payment, and the third party would cover the mortgage until times got better.

The Feds claim that the "third party" was really a cohort of Head's who never paid any mortgage. Instead, the group took out new loans on the homes which extracted all the equity. Then they'd take off, and the homes would go into foreclosure.

Investigators say some of the money was spent on cars, boats, and homes, which they have seized. But U.S. Attorney McGregor Scott says, "Unfortunately, it's nowhere near enough to make up for the total that's been stolen."

One of those who lost her house is Sheila Jones, who lived in her modest Sacramento home for nine years. She refinanced a few years back with an adjustable rate mortgage. When the payment jumped $500 a month, she wasn't sure she could afford it. "I had a lot of people come, who I knew were trying to rip me off," she says, but Charles Head's group "seemed sincere."

She signed on, and she was eventually evicted when the home went into foreclosure. The home now sits abandoned, damaged by squatters. Jones beats herself up for letting this happen, wondering what she missed in the paperwork, how she might have spotted a red flag. She begs others in trouble to call the Better Business Bureau or check around for references before signing on with anyone. "Do not fall into the position that we're in," she says.

In addition to the 115 people who lost homes in the federal case, there are others, like Laura Merchant, going after Head in state court. She hasn't lost her home--yet--but her credit is shot because the alleged cons took out a $100,000 line of equity on her house.

She thinks the police should be casting their net wider, "Because this isn't just one person. They've gotten notary people involved, they've got bank officials who've signed papers."

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