Rosa Conrado, San Bernardino, California, Saul Amador, West Covina, California, and Jesus Flores, Baldwin Park, California have been arrested and are believed to be members of a foreclosure fraud ring. Law enforcement officers have issued arrest warrants for Juan Perez, Grand Terrace, California, and David Giron, Ontario, California, who are also suspected to be involved in the scheme. The members are alleged to be participants of a fraud ring who preyed on desperate Southern California homeowners by falsely promising to renegotiate their home loans, but instead “ripped them off for thousands of dollars” while their homes fell into foreclosure. The Attorney General’s Office filed a 39-count complaint that includes multiple grand theft, money laundering and conspiracy charges against these suspects.

“It’s appalling how these scammers took advantage of desperate homeowners and ripped them off for thousands of dollars,” California Attorney General Edmund G. Brown Jr. said. “Our campaign against mortgage scams masquerading as foreclosure assistance will continue and even intensify.”

The arrests came after an investigation into First Gov, also operating as Foreclosure Prevention Services, uncovered that the company was soliciting hundreds of homeowners with mail flyers offering to help them stop the foreclosure process on their homes. The scammers falsely told homeowners that they would renegotiate their mortgages, reduce monthly payments, and transfer any delinquent loan amounts to the renegotiated principle. The company demanded an up-front fee, ranging from $1,500 to $5,000, to participate in the loan-modification program. The company also told the victims to stop any mortgage payments or communications with their lender, claiming they would interfere with the company’s effort to negotiate the loan modification.

When victims complained that they were still receiving delinquency or foreclosure notices from their lenders, fraud-ring members told the victims that the mortgage loans had been renegotiated, but the lenders needed a “good faith” payment to secure the new accounts. Homeowners made payments to accounts under business names such as “Reinstatement Department” or “Resolution Department” that made it appear as if the payment had been applied toward the loan. Bank records indicate that more than $700,000 was stolen from homeowners who fell victim to this scheme.

Typically, the scam initiated with a flyer sent to the homeowner. For example, Eleuteria and Arthur Washington of Redlands responded to a flyer she had received that falsely claimed to offer a way to renegotiate their home loan. On May 16, 2007, a representative of First Gov came to their residence. The Washingtons were asked for two cashier’s checks each for $2,023.58 (totaling $4,046.56), which equaled two times the combined total of the monthly payment on their first and second mortgage.

Although the checks were deposited that same day into the designated Bank of America account, Washington continued to receive letters from her lenders that the house would be auctioned. Washington’s numerous calls to First Gov went unanswered. Finally, she received a call from First Gov that her lenders had agreed to the loan modification.

The next day, Washington received another call from First Gov that the new loan documents would be sent to her to sign. She was told the lender wanted an additional payment and was instructed to make a deposit to Washington Mutual for $2,023.58. After Mrs. Washington made the deposit, she never heard from First Gov again. She later learned from her lender that the loan was never renegotiated, and the lender had never heard of First Gov. As a result of the scam, the Washingtons were cheated out of more than $6,000.

California homeowners should be aware the fraud ring’s flyer is still being circulated. The flyer is printed on goldenrod-colored paper in a yellow envelope. Occasionally, the contact name and number that appear on the bottom are changed.

“Loan-modification scams are becoming more and more prevalent across the country, particularly in California,” Attorney General Brown said. “California homeowners should be aware of the warning signs of foreclosure scams, so they don’t fall victim to these cynical schemes.”

The arrests are part of the California Attorney General’s ongoing crackdown on predatory lending and mortgage-fraud schemes in the state. In March, the Attorney General’s Office arrested Eric Pony and other members of Lifetime Financial Corporation for leading a similar mortgage-renegotiating scam that stole hundreds of thousands of dollars from California homeowners. Pony led the company in a predatory bait-and-switch loan-modification scam that targeted elderly and non-English speaking homeowners. The case is still pending in Los Angeles Superior Court.

Earlier this month, the California Attorney General’s Office secured $8.6 billion in loan relief for eligible homeowners in a landmark settlement with Countrywide Financial Corporation for engaging in deceptive and predatory lending practices that led many California families to lose their homes.

For homeowners who are behind in their mortgage payments or their home is already in foreclosure, services are available at little or no cost to help them save their home. For information about these services, consumers can visit www.yourhome.ca.gov or contact HOPE - Center for Foreclosure Solutions, a community-based organization that is available to assist them with foreclosure-related issues, at (888) 995- HOPE or online at www.995hope.org . Homeowners considering paying for foreclosure-assistance services, such as loan modification, should beware of anyone who tells them not to contact their lender or charges an upfront fee. It’s unlawful for companies that promise to help consumers in foreclosure to collect any money from them before they've done what was promised. Also, consumers should remember that they may not transfer title on their property to avoid foreclosure without the consent of their lender.