BUSINESS
12/02/2011 06:02 pm ET

Three Alleged Mortgage Scammers Arrested In California

Just one day after government authorities announced they would be bringing the hammer down on loan-modification scammers, three people have been arrested in California for allegedly defrauding homeowners looking to revise the terms of their mortgages.

Magdalena Salas, Angelina Mireles and Julissa Garcia, all of Stockton, California, were arrested Thursday and are being held at the San Joaquin County Jail, according to a release from the Office of the Special Inspector General for the Troubled Asset Relief Program, or SIGTARP.

Salas, Mireles and Garcia are accused of multiple counts of conspiracy, false advertising, and grand theft of personal property. The SIGTARP release claims that the three collected thousands of dollars in fees from California homeowners who were hoping to modify their mortgages, but that the homeowners never got the help they were looking for, and that some of them ended up losing their homes.

Unsavory mortgage practices have become widespread since the onset of the housing crash, which has left countless homeowners trying to stay one step ahead of foreclosure -- presenting a prime opportunity for scammers who claim they can lower homeowners' payments.

And such practices are exactly what a new government task force, announced earlier this week, is aiming to stamp out.

The task force, a collaboration between SIGTARP, the Consumer Financial Protection Bureau and the Treasury Department, will investigate people and companies suspected of trying to take advantage of homeowners seeking mortgage modifications.

Salas's company, Legacy Home Loans and Real Estate, was allegedly doing just that. A complaint filed with the state Superior Court names two dozen homeowners from whom Salas, Mireles and Garcia supposedly collected fees in exchange for loan modifications that never took place.

The complaint also accuses Salas of practicing real estate without a license, and says that Legacy Home Loans -- whose Web site header reads, "We are committed to making your dreams come true" -- distributed fliers in English and Spanish to Stockton homeowners reading, "WE WILL SAVE YOUR HOME! GUARANTEED!!"

A consumer fraud alert issued by SIGTARP this week notes that such guarantees are almost always a red flag for a scam, since third-party companies can't actually promise that a loan will be modified. Those decisions are only made by mortgage servicers.

Stockton, where Salas's company is based, may be particularly vulnerable to foreclosure-related scams. The city has had one of the highest foreclosure rates in the country since the onset of the housing crisis. In October, one in every 148 homes in Stockton received a foreclosure filing, according to HousingWire.

Last month, SIGTARP took action against more than 100 Web sites advertising mortgage-modification services on Google, Bing and Yahoo! search pages. SIGTARP says these sites were running similar scams -- asking for payment up front, then failing to deliver modified loans or giving bad advice.

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