The San Diego County district attorney, the state attorney general and the FBI announced Thursday that they arrested four San Diegans in connection with a Carlsbad-based foreclosure scam that bilked about 400 Southern California homeowners out of hundreds of thousands of dollars.

Arrests and search warrants were served Wednesday night based on an investigation of the scheme, which persuaded homeowners facing foreclosure to pay thousands of dollars for a bogus plan that purported to stave off eviction, county officials said.

Victims appear to be clustered in foreclosure epicenters -- communities with high numbers of foreclosures -- including Oceanside and Temecula, though victims also came from Los Angeles, San Bernardino and Orange counties, said Michael Groch, division chief of economic crimes for the district attorney's office.

County officials alleged that William Hutchings, 62, of Scripps Ranch, was the leader of the scheme. Also arrested Wednesday were his wife, Xiaoke Li, 43; Edgar Martinez, 30; and Diego Gil Gil, 38, officials said.

Officials said they were searching for Shawna Landis, 29, another person believed to be involved in the scheme.

Each person faces a maximum of 44 years in prison if convicted on charges of conspiracy, grand theft and deceitful practices as foreclosure consultants.

Groch said it is unusual for criminals to be given the maximum possible sentence.

According to an affidavit outlining the county's case against the Carlsbad company, Dream Homes and Loan, some homeowners paid $10,000 upfront for a so-called federal land grant service.

The attorney general's office started investigating Hutchings and his companies -- he also used the business names of Federal Land Grant Co., Land Grant Services and KBS Resources -- after receiving a tip from a real estate agent, according to the affidavit.

Hutchings and his associates explained to homeowners facing foreclosure during seminars that if they acquired a federal land grant, it would supersede the bank's grant deed and keep them from foreclosure, county officials said.

No such land grant program is known to be legitimate, according to the affidavit.

"I can tell you the moon is made of cheese. And if I say it enough, some people will believe it," said Stephen Robinson, deputy district attorney. "There is no federal land grant program."

When officials served one of the search warrants, Martinez and Gil were presenting a seminar to more than 50 people, officials said.

Many of the victims were Latino, and Hutchings' seminars were translated into Spanish, officials said.

Beyond the upfront fees, Hutchings would have homeowners transfer the deeds to their homes to the company and then charge the homeowners rent while doing nothing to stop the foreclosure process and pocketing the rent, Groch said.

Even after eviction notices were sent to the homeowners, Hutchings would reassure them that was a normal part of the process.

In the beginning, the scam focused on getting homeowners to pay the $10,000 upfront fee, he said. But as Hutchings began acquiring more customers, he reduced the fee to as little as $500 and then pocketed the rent, Groch said.

"For some of these families, $500, $1,000 $2,000 is all they can scrape together," Groch said. "Like most crooks, he said, 'I'll take your two grand if that's all you can give me. I'm not going to ask for $10,000 if you can't pay it.' Even $500 plus monthly rent is money for nothing."

Because the fees and rent varied, county officials said they were still trying to figure out exactly how much money Hutchings' company secured.

Officials said they have identified 400 properties involved in the scheme by looking at title transfers made to Hutchings' companies. Most of the properties are believed to be owner-occupied, so officials think there are at least 400 homeowner victims and are looking for more.

Though Hutchings' company would acquire the deeds to the homes, there was little profit to be made from the properties because the home's value had dropped below what was owed on the mortgage, Robinson said.

The best reason the district attorney's office sees for the acquisition of the property deeds was to give the scheme "an air of realism," Groch said. "If they don't do that, the scheme has less believability."

Some of Hutchings' business appears to have been initiated after some of the seminars, according to the affidavit.

And the affidavit says that several people were involved, including notaries and people checking the Internet to determine the rent for homes. County officials said the company's employees would use rentometer.com to determine how much to charge the homeowners.

County officials were still investigating whether those people had any knowledge of the illegality of the scheme before deciding to file charges, Groch said.

On April 2, a Department of Justice investigator attended one of Hutchings' seminars.

Less than two months later, county officials served search warrants on the primary business and two residences and made the four arrests. Seized during the searches were "a couple of vehicle loads" of evidence, including more than a dozen computers, Groch said.

The district attorney's office moved quickly because they realized more people were becoming victims with each seminar, he said.

"We knew if we didn't stop it, there'd be more," Groch said. "This was still going hot and heavy, so that made it a priority."

County officials said the case serves as an example to families facing foreclosure of "red flags."

For one, they said homeowners struggling to pay their mortgages should be wary of any service that charges a fee, because nonprofits offer foreclosure counseling for free.

Also, a "major red flag" should go up for homeowners if a foreclosure counselor asks to have the deed to the home granted to the company, officials said.

Contact staff writer Zach Fox at (760) 740-5412 or zfox@nctimes.com.