A Northern California man has been accused of operating a foreclosure rescue scheme in which he exploited bankruptcy laws in order to delay home seizures by lenders, according to reports.
Walter Bruce Harrell of Montara, Calif. has been charged via indictment with eight counts of bankruptcy fraud and two counts of making false statements in bankruptcy proceedings, the National Mortgage Professional reports. The indictment accuses Harrell of defrauding lenders that were trying to foreclose on homeowners. He was arrested Wednesday and released on a $50,000 bond, authorities said.
Federal prosecutors have become increasingly concerned about schemes aimed at homeowners in foreclosure as these types of scams can prevent borrowers from getting legitimate assistance with their foreclosures.
The Indictment alleges that Harrell devised and executed a scheme to defraud creditors who were attempting to lawfully foreclose on numerous properties, and that he did so by delaying and obstructing foreclosure sales through the improper use of the federal bankruptcy process.
The Troubled Asset Relief Program, a federal office created to oversee the program commonly known as the 2008 bank bailout, announced the indictment. TARP is involved because the creditors trying to foreclose on the home -- institutions that were not named in court documents -- have received federal funds under that program.
According to the report, Harrell allegedly arranged for property owners to grant fractional interests of between two percent and 20 percent of their properties to individuals whom Harrell had paid to file bankruptcy cases in the U.S. Bankruptcy Court for the Northern District of California. These actions invoked the automatic stay provision of the U.S. Bankruptcy Code, which halts foreclosure sales until the creditor seeks relief from the stay or until the bankruptcy case is dismissed.
Harrell, 71, plans to plead not guilty, said the federal public defender assigned to his case, Candis Mitchell.
