Stopping the Madoffs of Foreclosure

Foreclosure scams have affected thousands of Americans, but homeowners and their advocates are fighting back to put these “Madoffs” of foreclosure behind bars.

Foreclosure scam artists stole millions of dollars from homeowners, but now they’re paying for it. Image: St. Phillips/iStockphoto

With thousands of Americans losing their homes, business has been booming for foreclosure rescue scam artists. In response, the government and homeowner advocacy groups have been fighting back, and they are winning. Here are some of the most horrendous cases:

Maximum sentence: 20 years and $250,000 in fines

Brooklyn’s Garth Celestine is facing prison time after taking New Jersey homeowners on a million-dollar ride. He admitted in federal court this March that he and his partner made false representations and false promises to New Jersey homeowners in a devastating foreclosure rescue scam.

Modus Operandi: Celestine and his partner told homeowners facing foreclosure that they could improve their credit and keep their homes with the help of “Home Savers Consulting Corp.” But what the company actually did was convince the homeowners to put the home of the name in a third-party with good credit for 6 to 12 months. Then the partners would take out mortgages on the good credit of the “new” homeowners. Eventually Celestine and his partner would pocket the loan money themselves.

Loot: Lending agencies were defrauded of about $10 million in total and homeowners lost about $1 million.

Maximum sentence: Life

Timothy Barnett, 47, is facing a potential life sentence after his arrest on charges of foreclosure fraud in South Los Angeles. California’s three-strikes law is rarely applied to white-collar crimes, but in Barnett’s case (after two burglary convictions in 1997) prosecutors are hoping for an exception. Barnett is charged with 23 felonies, including identity theft, real estate fraud, and theft from the elderly.

Modus Operandi: Barnett also used the bait and switch. He allegedly tricked homeowners by meeting them in person and promising to help them avoid foreclosure. The victims thought they were refinancing delinquent mortgages, but according to prosecutors, they were really signing over the title to their homes for a fraction of their value.

Loot: Barnett owns a $3.1 million home and three Mercedes-Benz cars, but it’s up to prosecutors to prove that these were the spoils of his scheme.

Maximum combined sentence: 72 years in prison

In San Diego this September, two brothers, David Zepeda, 57, and John Zepeda, 59, were charged with 106 felony counts (including identity theft, forgery, and conspiracy) for a foreclosure scheme that allegedly spread across several counties, conning more than 300 people.

Modus Operandi: According to prosecutors, the Zepeda brothers stole the identities of several San Diego notaries and forged hundreds of deeds across the state. They acquired properties in foreclosure with phony quitclaims, rented them out, and collected the cash.

Loot: $1.5 million. Authorities seized 8,000 silver coins, gold ounces, diamond bracelets, expensive watches and a Bentley—all allegedly bought with the stolen money.

Public education

The fight to stop foreclosure scams has extended beyond the legal system. Advocacy groups as well as government agencies are working to educate the public on how to protect themselves from foreclosure scam artists.

  • NeighborWorks, a non-profit organization, provides information about the most common types of scams and the red flags to look out for in any company offering to help. These warning signs include: a company asking for a fee in advance to work with your lender, a guarantee that the company can stop a foreclosure or modify a loan, the request for personal financial information online or over the phone.