| Finance

The Dallas Morning News (MCT) - Ellis County, Texas, Constable Mike Jones drove his white cruiser through the neighborhood of palatial two-story homes and lush lawns. He stopped in front of a house with an overgrown weedy lot and a Ford Probe jacked up in the driveway.

Sheets hanging in the windows clashed with the home's $400,000 price tag.

Jones knew that homeowners in this subdivision could afford the upkeep of their property. So why weren't they?

What he discovered was that squatters were living in a foreclosed home they never owned.

Other houses also stood out to Jones on this spring day last year. A dozen lots in the 50-home rural subdivision called Honeysuckle Estates had overgrown lawns neighboring pristine, manicured yards.

"When it doesn't look right, something's not right," said Jones, who at the time was a deputy constable.

The neighborhood had become a victim of the latest housing foreclosure scam. It wasn't the only one.

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The Lake Ridge development in Cedar Hill, Texas, had renters living in million-dollar homes for less than $1,000 per month. Another subdivision in nearby Oak Cliff also became a prime target. And there could be more.

In the Dallas area, the scam seems to be more common in cities that have been hit hard with foreclosures. The latest figures available show Lancaster, DeSoto, Duncanville and Cedar Hill had more than 900 foreclosures in the first half of 2008.

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Here's how the scheme works: When a home enters foreclosure, someone files an appeal bond, which delays the court's foreclosure process for 30 to 60 days or longer. With the case tied up, the scammers change the door locks and find people to move in. The scammer collects rent until the homeowner, real estate agent or authorities disrupt the ruse.

"It's so novel. It's ingenious, really," said Dallas County prosecutor Stephanie Martin, who won a conviction last month in a groundbreaking case.

The scammers typically have a keen knowledge of the foreclosure process and the brazenness to bilk the system, authorities say.

"You have to have a somewhat sophisticated person to pull this off," said Andrew Masters, an investigator with the Dallas County district attorney's office. "There are holes in the system that allows it to be easy."

And the renters aren't always innocent victims, Masters said. Some know about the scam and are taking advantage of the cheap rent. When authorities kick them out, they simply move their belongings into a new foreclosed property they've already scoped out.

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After seeing Honeysuckle Estates, Jones called a meeting with a dozen southern Dallas County investigators, sort of a housing scam symposium, to share information. He told detectives what to look for and how the scammers operated.

"This white-collar crime, for most police officers, myself included, this is over their head," Jones said. "What (the meeting) did was clear up the fog. Sometimes the simplest stuff is what you overlook."

That meeting, it turned out, went a long way toward helping to arrest at least half a dozen people suspected of running the scam in southern Dallas County and Ellis County. There could be more.

"It's just amazing how much people can do, and there are no checks and balances anywhere on these mortgage issues," Cedar Hill police Lt. Steve Lafferty said. "They've taken the system, and they've worked it to the hilt."

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Last month a judge convicted pastor Jackie Lewis, 53, of Cedar Hill, on one count of securing execution of a document by deception in connection with renting a foreclosed home in Cedar Hill.

The charge is normally a third-degree felony, but because of a 1994 theft conviction, he could face two to 20 years in prison.

"He preys on people who are in a desperate situation," Martin said during closing arguments in the Lewis trial. "He's a real estate vulture because he's preying on the real estate market in Dallas County."

During the daylong trial, Judge Fred Tinsley heard about the complicated web of deception and how Lewis swindled one renter in 2007.

Gloria Harrison needed a larger place to live with her two adult children and her grandchild. She talked to a mutual friend who put her in touch with Lewis, an affable pastor who was "doing real estate."

Harrison told the judge that Lewis agreed to show her a property in Cedar Hill.

"He told me that the owner of the house was getting a divorce" and wanted to collect rent as extra income, she said.

The 2,880-square-foot home was appraised for about $167,000. And Harrison, who at the time worked for the Texas attorney general's office as a child-support officer, agreed to pay Lewis $1,600 a month for two years.

But Harrison said she was there just 12 days when the owner's daughter showed up.

"At first I thought my father had a mistress I didn't know about," Yolanda Wilson testified.

Then she called police. After a lengthy investigation, police arrested Lewis on ...