More than 50 struggling Chicago-area homeowners last year placed their faith and their savings into the hands of Washington National Trust, which promised to save their homes from foreclosure.
The homeowners, most of them Hispanic and living in Aurora, paid thousands of dollars in upfront fees. They wrote hardship letters, detailed their finances and signed quitclaim deeds transferring ownership of their homes to Washington National.
"I thought everything was going fine until (a state investigator) came to the door," said Mario Contreras, one of the victims of an alleged mortgage rescue scheme so sophisticated that it involved notary publics who officially stamped documents that were then filed in county offices and courts.
State and federal investigators confirmed they are conducting a criminal investigation of Washington National Trust. The man at the center of the allegations is believed to be connected to an extremist anti-government movement and is wanted on a 2-year-old arrest warrant in Georgia for mortgage rescue fraud.
The Illinois Department of Financial and Professional Regulation, which referred its probe to criminal investigators, believes it is the department's largest case of mortgage rescue fraud in terms of the number of people victimized. From the first 11 homeowners contacted by the state, Washington National received $56,500 in upfront fees and property transfers of homes valued at almost $895,000.
Almost since the housing crisis began, unscrupulous individuals have sought to profit from the misfortunes of desperate, unsuspecting homeowners, emptying their pockets while promising assistance that never materializes. As time has passed, the people behind the schemes have grown more cunning, the deceptions more sophisticated and the victims more willing to take any last-ditch chance to save their homes.
Unraveling the harm won't be easy. Struggling homeowners are further behind in their payments, and their lenders' hands may be tied.
In June 2012, papers filed with the Cook County Recorder of Deeds, and signed by "Sovereign King Bey," identified Washington National Trust as an "unincorporated association indigenous business" that is "protected and governed by International Law United National Declaration on the Rights of Indigenous Peoples."
Sovereign King Bey and King Bey are two aliases listed on an arrest warrant issued in May 2011 in Georgia for Melvin Torrelle Bell on four counts of felony mortgage fraud. The charges allege that Bell, now 36, deliberately misrepresented ownership of properties in Fayette County, Ga.
In September 2011, the FBI issued a bulletin on the growing threat that the sovereign citizen movement presents to law enforcement authorities.
The FBI warned that sovereign citizens' beliefs lead them to activities that defraud banks and participation in white-collar crimes that can include mortgage, mail, bank and wire fraud.
"They believe that they govern themselves and they're not forced to follow the laws of the United States," said Maj. David Moorman of the Fayette County Sheriff's Department, which issued the arrest warrant for Bell.
Washington National, operating
out of an office building in downtown Aurora and listing a headquarters address on Lake Street in downtown Chicago, through word of mouth and a website that is still operational, promised homeowners that it could stop foreclosure proceedings.
Only later would desperate homeowners like Contreras find out that the address was a UPS Store location, and their homes were far from saved.
Contreras, a landscaper, and his wife, Laura, three years ago began having trouble making payments on the Aurora home they share with their four children. Contreras said his mortgage servicer, Citimortgage, advised him to find a housing counselor to help him secure a loan modification. He never sought the assistance of a government-approved, nonprofit counselor.
Citimortgage initiated foreclosure proceedings against Contreras in early 2011. A co-worker told him about Washington National, and Contreras said he met last spring with Carlos Rayas, a licensed mortgage loan originator, filled out paperwork and gave Rayas a cashier's check for $5,125.
In July, Contreras had misgivings and filed a complaint with the Illinois attorney general's office.
Nevertheless, Contreras signed a quitclaim deed that transferred his home's ownership rights to Washington National. He was told that he would begin paying $800 a month to Washington National and that in less than six years, the property would be deeded back to him.
Among the documents filed for Contreras in the Kane County recorder's office in October was one alleging fraud and breach of contract by Citimortgage. Also filed was the quitclaim deed and a promissory note for more than $159,000 to be paid to Washington National.
The language in the promissory note raised a red flag with the county recorder's office, which contacted the state Department of Financial and Professional Regulation. It "did not pass the smell test," said Manuel Flores, the department's acting secretary. "We soon discovered a pattern."
From July to the end of December, at least 54 quitclaim deeds were filed in Kane, DuPage, Kendall and Will counties, transferring ownership of homes to Washington National. On Oct. 12 alone, 23 quitclaim deeds were filed with Kane County.
Foreclosure notices kept arriving at Contreras' home, and he went to some of the hearings, telling the court he was getting help from Washington National. At one, Contreras said, a judge told him that the help he was getting wasn't enough.
"The whole time Carlos is telling me, 'You need to have confidence in me,'" Contreras said. "He said, 'If anything goes wrong, I'm going to give you money out of my pocket. My company is a trust. They are investors. They are investing money in the community, so they don't need to pay taxes. It's a new federal program. Trust me, trust me, trust me.'"
Contreras decided to trust Rayas.
"You're sitting down talking with someone who speaks your language. The trust goes up," Contreras said.
On Dec. 26, Mario Pantoja, director of consumer services for the state Department of Financial and Professional Regulation, met with Contreras, who at first didn't believe what Pantoja told him.
"It took a little bit of convincing," Pantoja said. He said he explained to Contreras that he had contacted his bank and that it had not spoken with anyone at Washington National. Washington National, Pantoja said, had people like Contreras "in their pocket. They had them convinced that they were a bank, they were 100 percent legitimate and they had their best interests at heart."
Contreras learned that Washington National is unlicensed, that it is illegal for an entity to get upfront fees for mortgage modification services, and that his home was still in foreclosure.
Notified by the state, Citimortgage began working directly with him, and he is in the midst of a trial loan modification. He has little expectation of getting back the money he paid Washington National.
Investigators began working with an informant who they said had gotten a $500 finder's fee for every client brought to Washington National; that person's status in the case remains unclear. The state interviewed 10 more homeowners and heard that they also paid thousands of dollars to Washington National and signed quitclaim deeds in exchange for more affordable mortgage terms that never came to be.
"This is definitely a sophisticated mortgage rescue (operation)," said the department's Flores. "In a short time frame, they were able to recruit a lot of unsuspecting borrowers. They did it through filing of documents that appear to be valid. And in some of these cases, this company even appeared before judges."
In mid-February, the state issued a series of enforcement actions and fines against Washington National and people named in its documents. It alleged that Bell orchestrated a mortgage rescue fraud scheme. It filed cease and desist orders and assessed fines against other alleged associates, including notary publics Gloria Navarro, 43, of Aurora; Gladys Hernandez, 39, of Oswego; and Olga Saltijeral, 75, of Aurora.
The state is seeking to revoke Rayas' mortgage loan originator license, which is active. It also filed a formal disciplinary complaint against Monica Hernandez, 42, of Oswego, a licensed real estate agent.
Navarro declined to comment. Saltijeral referred the Tribune to an attorney who did not respond to a request for comment. Efforts to reach Monica Hernandez, identified by the state as Bell's fiancee, Gladys Hernandez, Rayas and Bell were unsuccessful.
The state's Department of Financial and Professional Regulation also notified state and federal authorities of its investigation.
The U.S. Postal Inspection Service confirmed it is leading a federal investigation of Washington National Trust but declined to comment further. The Illinois attorney general's office and the Illinois State Police also confirmed they are investigating Washington National.
Local authorities in Aurora say they are well-acquainted with Bell, Washington National and the illogical, hard-to-decipher documents filed in foreclosure cases that involve Washington National. In fact, one Kane County Circuit Court judge issued an order in September barring King Bey and Washington National from filing any documents on behalf of homeowners because they were being filed by someone not licensed to practice law.
Homeowners who worked with Washington National and the many mortgage servicers involved will have to grapple with thorny legal issues because the properties are in limbo. Despite the quitclaim deeds, homeowners are still responsible for the mortgage payments.
There are legitimate companies that buy distressed mortgages from lenders at a discount and then work with homeowners to write down the value of the loan and make payments more affordable. But those transactions do not involve paying any fee for the service or signing a power of attorney or a quitclaim deed.
"Organizations like these pop up with names that appear to be reputable," said Russ Cross, a senior vice president at Wells Fargo Home Mortgage. "They sound official. The story they tell is plausible and people, unfortunately, pay money upfront."
Had it not been for the investigation, mortgage companies would have been unaware of the transfer of the homeowners' interest in the properties until a court-ordered auction at the end of the foreclosure process.
If a transfer of ownership interest was fraudulent, conveying it back to homeowners will be possible, but the burden of that undertaking will fall on the homeowners, not the mortgage servicers, said Daniel Lindsey, an attorney at LAF, formerly the Legal Assistance Foundation of Metropolitan Chicago.
"You can't just go down to the recorder's office and file something and have it removed," Lindsey said.
While two of their three sons played outside on a snowy day last month, a nervous Ernesto Martinez, and his wife, Perla, sat at their dining room table and worried about the looming foreclosure auction date, set for Thursday.
Martinez, a carpenter, negotiated one mortgage modification in 2010 but fell behind again and stopped making payments in December 2011. In June, Fifth Third Bank filed a foreclosure case and tried to contact Martinez, he said, but he didn't call back because he was working with Washington National. Martinez attended a court hearing on his case and told the judge he was working with a company to prevent the foreclosure.
"I listened to (Washington National's) program and it looked pretty good," said Martinez, who explained the pitch he got. "They buy the loan and they sell it to me at half price. It was pretty good. The cherry on the cake is, these people who buy your loan are Native Americans. They own the land, so they don't pay taxes and you're going to be under their name so you're going to be free of taxes."
Martinez said he worked with Monica Hernandez, paid Washington National $5,125, wrote the required hardship letter and signed a quitclaim deed that was filed in August. By December, the couple became worried when they weren't getting any other information from Washington National.
In January, according to Martinez, Washington National called him and told him that if someone from the state called, to not talk. A week later, Martinez was contacted by authorities and shortly thereafter, a legal assistance attorney told them the house was scheduled for auction April 11.
Made aware of the circumstances by the Tribune, Fifth Third postponed the sale, and the bank has since arranged a trial loan modification with Martinez.
"If we had a customer at the eleventh hour that missed an opportunity to preserve homeownership as a result of unsavory activity, we will work with that customer," said Jonathon Meade, a senior vice president at Fifth Third Bank.
For Connie Vazquez and her family, the meeting with state investigators came too late. On a blustery morning last month, Vazquez met a representative for her mortgage servicer, Chase Bank, outside the family's Aurora home. With her adult sons standing nearby in tears, she handed over the keys to the white Cape Cod-style home where they grew up, where the family dog is buried in the backyard.
With her home in foreclosure since October 2010 when her husband, Fernando, lost his job as a union painter, Vazquez knew she was running out of chances to keep it. When an acquaintance she had known for a decade told her about Washington National last summer, she made an appointment.
Vazquez said she only dealt with Monica Hernandez, who told her that Washington National could help with her loan and that her lender had committed fraud by giving her a 30-year mortgage.
Vazquez said she was worried about the lack of qualifications for the program, but the documents looked legitimate and nothing seemed amiss at the Aurora office, except that all the doors were kept locked.
"This was the last chance I had," she said.
She signed the documents, paid $7,625, stopped trying to work with Chase as directed, and brought her mail from Chase to Hernandez. She didn't go to court appearances, and counted on getting back her house in five years by paying $1,100 a month to Washington National.
In late November, unbeknownst to her, her home was repossessed by Chase. "There were no more letters, no more nothing," Vazquez said. "I thought, 'Oh, all right, they've taken care of it.'"
Since mid-January, she has texted back and forth with Hernandez, in a futile attempt to get back her money.
Chase, unaware that Vazquez had quitclaimed the home to Washington National, gave her $3,600 in a cash-for-keys transaction that is frequently offered to foreclosed homeowners. The bank was unaware of the quitclaim deed when it made the offer, a Chase spokeswoman said.
Vazquez, now living in a small apartment in Aurora, said she feels most sorry for the families with young children that she saw in the offices of Washington National.
"It's just such an injustice," Vazquez said. "It didn't happen to rich people. It happened to poor people who have less money to spare. You can't bounce right back from that."