In recent years, the industry has seen various types of foreclosure rescue fraud perpetrated against borrowers, lenders, and servicers. One example is a California-based scam that caused losses of more than $2.5 million whereby the scam's orchestrators recorded fraudulent documents in local courthouses in an effort to "cloud title" and halt or stall the foreclosure process.
Perpetrators Juan Ramon Curiel and Santiago Palacios-Hernandez operated Star Reliable Mortgage with offices in three California localities. Star Reliable Mortgage offered homeowners a purported "loan elimination" program that would enable such homeowners to own their homes "free and clear" of any loans or mortgages. The scammers instructed homeowners to stop making their mortgage payments and charged upfront fees ranging from $2,500 up to $4,500 and additional monthly fees. The perpetrators then filed various fraudulent documents at county recorders' offices on behalf of the homeowners, supposedly replacing the legitimate trustees with fictitious trusts affiliated with Curiel or Palacios-Hernandez in an effort to create an encumbrance on the title that would delay the foreclosure process. Because foreclosures were stalled, homeowners continued to pay the monthly fees to defendants believing that their services were legitimate and successful. Instead of owning their homes "free and clear," however, many of the homeowners lost their homes in foreclosure.
On December 18, the U.S. Department of Justice's U.S. Attorney's office announced that both Curiel and Palacios-Hernandez pled guilty to conspiracy to commit mail fraud and bankruptcy fraud and will face up to 30 years in prison and a $1 million fine.
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