Washington State Man Sentenced To 25 Years In ‘Foreclosure Relief’ Scam; Judge Calls Jeff McGrue ‘Heartless’; FBI Says He Issued Nonexistent ‘Bonded Promissory Notes’ Purportedly Drawn On U.S. Treasury To Fleece Lenders And People ‘At The End Of Their Rope’

Photo source: FBI

A Washington state man who ran a foreclosure-rescue scam by telling victims he could save their homes gathered more than $1 million from people “at the end of their rope” and tried to bilk lenders out of at least $55 million, federal prosecutors and the FBI said.

Jeff McGrue, 51, of Tacoma, targeted California borrowers. He has been sentenced to 25 years in federal prison.

U.S. District Judge Otis D. Wright III called McGrue “heartless” when ordering the sentence, prosecutors said.

Documents in the case suggest McGrue fashioned a purported remedy for distressed homeowners that mixed redemption fraud with standard hucksterism. As is typical in foreclosure-rescue schemes, McGrue got paid up front, and his customers lost everything.

Redemption fraud normally is associated with tax fraud and efforts to gain illegal tax refunds, often for spectacular sums. Under the crackpot redemption theory, the U.S. government maintains secret accounts for individual citizens that can be tapped to retire tax debt and other forms of debt.

In his scam, McGrue appears to have borrowed from the redemption theory and applied its bizarre conjecture to mortgage debt relief.

Through a company known as Gateway International, McGrue and “others falsely told homeowners that, if they paid an enrollment fee and monthly rent and signed over title of their homes to Gateway, McGrue would use ‘bonded promissory notes purportedly drawn on a U.S. Treasury Department account to pay off their mortgages, thereby stopping foreclosure proceedings,” the FBI said.

“The homeowners were falsely told that lenders were legally required to accept the notes, that they would be able to buy their homes back from Gateway International at a discount, and that they would receive up to $25,000, even if they chose not to re-purchase their houses,” the agency said.

But McGrue “did not own any bonds and did not have a U.S. Treasury Department account,” the FBI said. “Nor could he have the type of account described to homeowners because the Treasury Department does not maintain accounts that can be used to make payments to third parties.”

More than 250 customers enrolled in the McGrue plan, but he “did not save a single home,” prosecutors in the Central District of California said.

Real-estate agents who did not do their homework but nevertheless were eager to earn commissions helped popularize the foreclosure-relief scheme, according to the government.

Strange, foreclosure-related events are occurring across the United States. In the Atlanta area, for example, so-called “sovereign citizens” have been moving into foreclosed homes and issuing fake quit-claim deeds designed in theory to undermine lenders’ interests in properties.