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Guilty Pleas in Foreclosure-Avoidance Scheme

If anyone doubts there are "smooth-talking con artists who take advantage of people who fall behind on their mortgage payments," to quote Rod J. Rosenstein, U.S. Attorney for the District of Maryland, consider the story of two locals who appear to have prison sentences of up to 20 years in their futures--and that's on just one of the charges. They also have agreed to forfeit more than $2.2 million in proceeds from criminal activity.

Cheryl Brooke, 52, of Upper Marlboro, and Winston Thomas, 43, of New Carrollton, pleaded guilty this week to participating in a foreclosure-avoidance scheme that defrauded homeowners and mortgage lenders, according to an announcement today from Rosenstein's office. They were charged with wire fraud and conspiracy last June. Also charged at the time were Michael K. Lewis, 56, who lived with Brooke, and Earnest Lewis, 59, of Takoma Park, according to the Post report. The Lewises were not named in the U.S. Attorney's announcement.

From the announcement:

"According to their plea agreements, from at least 2004 until May 2008, a conspirator aired television advertisements that targeted financially vulnerable individuals, representing that he could improve their credit, save their homes from foreclosure and assist them with bankruptcy. Viewers who called the toll-free number were scheduled to meet with the conspirator. At the meetings, they were solicited to purchase a variety of for-fee services for reducing debt, as well as a pre-paid legal plan, income tax return preparation services and bankruptcy petition preparation.

"Thomas, who was then a senior loan officer with a mortgage lender, and Brooke specifically targeted individuals who owned and had equity in their homes, but were facing foreclosure on their homes because of their inability to make monthly mortgage payments. The defendants fraudulently represented to the homeowners that their 'lease/buy-back program' would help the homeowners to keep their homes. The homeowners were told that the 'good credit' of another co-conspirator would be used to temporarily refinance their homes, that they had to sign their homes over to such co-conspirator and that they could repurchase the homes in roughly one year, or once they regained their financial footing. During the interim, they could remain in their homes by paying 'rent' and fees to the co-conspirator by having their bank accounts directly debited by an account belonging to Brooke's company, 'In the House Technologies.' Brooke allowed the IHT account to be used to deposit the proceeds of the equity-stripping scheme.

"Thomas and other co-conspirators failed to inform the homeowners of the particulars of how the lease/buy-back program worked and misrepresented the amount of money that the homeowners would receive at settlement, what would be done with any equity in the homes and the need to file for bankruptcy protection. In addition, in order to induce mortgage lenders to provide mortgage loans to purchase the homes, Thomas submitted false financial and employment information to mortgage lenders. After financing was obtained to purchase the properties, Brooke would file motions to dismiss the homeowners' bankruptcy cases so that the settlement could take place."

Keep this little tale in mind when you field sales pitches for debt-relief services.

By Elizabeth Razzi  |  April 15, 2009; 6:00 AM ET
Categories:  Foreclosure , Mortgages  | Tags: bankruptcy, equity, foreclosure, foreclosure-avoidance, fraud  
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Next: Update: More Guilty Pleas in Mortgage Scheme

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