A man who promised California homeowners foreclosure settlements and eventual mortgage payoff will spend the next 25 years behind bars[1]. Jeff McGrue promised homeowners that he would help them pay off their mortgages and alleged that he had worked out deals with banks. However, when happy homeowners sent him their monthly payments to resolve their foreclosures, McGrue kept the cash and let foreclosure process continue. He stole “at least $55 million” in the course of a single year – from fall 2007 to fall 2008 – and networked with other individuals engaged in similar schemes to expand his “business,” although he did not expand out of California’s Central Valley.

McGrue’s scam hinged on enrolling people in his “Gateway Program,” in which homeowners paid an enrollment fee and a monthly fee, signed over title to their homes, and McGrue promised to send “bonded promissory notes” to lenders, which he falsely told homeowners lenders were legally required to accept. The theory was that homeowners would later buy their homes back from McGrue at a discount or receive a cash payment from McGrue when they opted not to repurchase their home. However, McGrue did not own any bonds, did not have a U.S. Treasury Department bank account of any sort and falsified documents to make it appear that victims’ outstanding mortgages had been paid off. Furthermore, the process that he described to homeowners for saving their homes does not exist because the Treasury does not maintain those types of accounts.

McGrue was only one of several known foreclosure “rescue” services operating on similar schemes, and it is possible and likely that there are more out there. Whether you are an investor, a real estate agent or a distressed homeowner, always check out a service completely before you enroll, including verifying the legitimacy of documents and services. Additionally, remember that most states prohibit loan modification and foreclosure rescue companies from collecting fees before the service is successfully performed.

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[1] http://www.centralvalleybusinesstimes.com/stories/001/?ID=18898