7 Arrested in California Mortgage Fraud Ring

California authorities said Tuesday they filed a lawsuit and made seven arrests in a mortgage fraud case involving seven companies and thousands of homebuyers in Southern California.

Attorney General Jerry Brown said his office was seeking penalties and restitution of more than $20 million in the bait-and-switch scam led by 25-year-old real estate agent Eric Pony.

"This is among the worst we've ever seen," Brown said. "This is not just exaggeration and puffing. This is straight out deliberate stealing and fraud."

The case, filed under seal Monday in Los Angeles Superior Court, alleges that the group tricked consumers into agreeing to excessive loans, unaffordable home payments and exorbitant fees.

The suspects are accused of forging signatures when consumers would not sign paperwork.

The seven suspects were arrested on charges including conspiracy, grand theft, forgery and elder abuse, San Bernardino District Attorney Michael Ramos said.

The attorney general shut down the companies and seized 16 properties in Los Angeles, Las Vegas and San Antonio worth more than $6 million.

Prosecutors also froze multiple bank accounts and seized at least 10 luxury cars, including four Mercedes Benzes, two Ferraris and a Bentley.

Pony remained at large. The suspects in custody included Carol Pencille, 57, an escrow officer and chief executive of Olympic Escrow Inc., and Sibpum Armpornpet, 31, an Olympic principal in whose office authorities said they found documents with cut-and-pasted signatures of consumers.

The attorney general said the companies, Lifetime Financial Inc., Nations Mortgage Inc. and Greenleaf Lending Inc. arranged loans that often resulted in payments higher than the consumer's entire monthly income. Many customers lost their homes because of the transactions.

Telemarketers employed by the companies set up home appraisals that were wildly inflated to qualify homeowners for excessive loans, then pressured victim's to sign, prosecutors said.

In some cases, prosecutors alleged, the companies promised thousands of dollars in cash back but instead used that money to cover high fees; falsely promised to reimburse borrowers for prepayment penalties from their current lenders, falsified income statements and refused to honor written demands to cancel loans.