A California man pleaded not guilty last week to federal charges of leading a widespread mortgage fraud scheme that FBI agents are calling "Operation Homewrecker."

The name fits. According to court documents, Charles Head, 33, of Los Angeles, allegedly preyed on financially troubled homeowners at risk of foreclosure, promising to help them keep their homes and repair their credit. He had plenty of help. The government has indicted 18 other defendants in U.S. District Court (Eastern District of California) for Operation Homewrecker, which involves two separate but similar ventures.

The scam, which the government says began in 2004 and lasted until at least 2006, worked like this. Head and others would contact homeowners, offering them two options: a refinance (for which no one "qualified") or a rescue plan. This second option involved adding an "investor" to the home's title and required homeowners to pay a more affordable "rental" payment to this third-party, which would supposedly rebuild the homeowner's credit.

Once the "investor" was added to the title and sometimes even replaced the homeowner's name, Head and the other defendants allegedly would refinance the home, cashing out the equity without the homeowner's knowledge or participation. The defendants would also pocket the monthly "rent" payments for these homes. When they stopped paying the mortgage or sold the house, the rightful owners were left without their homes.

It added up to more than $12 million in allegedly stolen home equity, as detailed in two separate indictments. "We did a very conservative loss calculation," says Assistant U.S. Attorney Ellen V. Endrizzi, who is prosecuting the case. "This doesn't include lender loss" so the total cost could go even higher.

She says very few of the victims-perhaps 10 percent to 15 percent-got their homes back. "Others are out on the street," she says. There appears to have been few common threads between the victims, who come from all ethnicities, races, and genders. "I think for the most part you had desperate folks in desperate straits," Endrizzi says. "It wasn't that one group of people was targeted other than those who were 30 to 60 days out" on their mortgage.

Head, who is being represented by court-appointed lawyer Scott L. Tedmon of Sacramento, Calif., says he's innocent of the charges against him. "He is adamant in his position that he didn't do anything illegal," Tedmon says.

Those charges include mail fraud, money laundering, conspiracy to commit those acts, and other related charges. If found guilty, penalties for such offenses range from five to 30 years, plus fines, depending on the charge.

While the cases against Head and the other defendants move through the court system, Endrizzi says her office is beginning to look more closely at the scheme's "second level," which may have included mortgage brokers and notary publics.

Overall, mortgage fraud remains a huge problem; the Eastern District of California has formed a multi-agency task force to tackle the problem, and the FBI nationally has also been examining the issue.

"This is just one little group of folks in L.A. we found," Endrizzi says. "I can guarantee that rings like this are still working across the nation."

For more information on "Operation Homewrecker" go to:

For more on mortgage fraud go to:

Do you suspect mortgage fraud is happening in your market? Contact Alison Rice (alison.rice@comcast.net).