In Los Angeles, California, The Associated Press
- A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure. Jeff McGrue of Tacoma man was convicted last Friday in Los Angeles.
- Federal prosecutors say McGrue's company, Gateway International, promised to delay or prevent foreclosures by having at least 250 victims sign over title to their homes.(1)
- In return, McGrue sent the lenders more than $50 million in phony promissory notes that he claimed were backed by the U.S. Treasury.
- Authorities say McGrue didn't save a single home but he collected at least $800,000 in fees and rent from victims. He also got titles so he could resell the properties.(2) Three other men pleaded guilty last year to taking part in the scheme and are facing prison terms.
Source: Man convicted in LA of foreclosure scam (A Washington state man is facing up to 180 years in federal prison for defrauding people who lost their homes to foreclosure).
For the FBI press release, see Washington State Man Found Guilty of Orchestrating Foreclosure Rescue Scheme that Falsely Promised to Help Distressed Homeowners Keep Their Homes.
(1) According to the FBI press release, McGrue worked with two others – Gerald Guidry, who owned a company called My Debt Solutions, and Ronald Morgan, who owned a company called Omnipoint – to defraud homeowners by promising to delay or prevent foreclosures and to pay-off delinquent mortgages in exchange for the homeowners making payments and transferring title to Gateway International.
Through the Gateway Program, McGrue and the others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use "bonded promissory notes" purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings, according to the FBI. The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses, the FBI said.
(2) While sale leaseback ripoffs are typically associated with equity stripping scams (where a victimized homeowner has a high level of home equity ripped off from out from under), this story illustrates how the sale leaseback deal can be equally applied to a situation where the homeowner has little or no home equity, when used in conjunction with an upfont fee, rent skimming racket. The scammers' profits come from the rent they collect from the victim on the leaseback arrangement (while failing to pay the existing mortgage payments, thereby subjecting the home to foreclosure), as well as any upfront fees the scammer can squeeze out of the unwitting victim for the 'privilege' of being ripped off.