MURRIETA -- Several dozen families are being asked to leave the houses they rent, a mass eviction that makes them the latest group of people touched by an alleged real estate scam centered in Murrieta.

The houses belong to about 20 plaintiffs who have signed on to a class action lawsuit that accuses three Murrieta men and their companies of running a vast pyramid scheme. According to the suit, the defendants suckered investors into buying overpriced houses with 100 percent financing. They allegedly promised the investors that excess cash from the loans would be plowed into low-risk, high-yield investments that would help to cover the monthly mortgage payments.

But the loans went into default late last year after the defendants stopped making the payments, the suit alleges. With more than 100 homes set to be auctioned or seized by the lenders sometime this year, the plaintiffs have told their renters to leave this spring. They acted on the advice of their attorney, who said the likely foreclosures would otherwise force out the renters with just a few days' notice.

Some neighborhoods in Murrieta stand to lose four or five families. Stonewood Consulting Inc., one of the defendants, arranged numerous home purchases that were heavily concentrated in just a few neighborhoods, according to a database used by real estate agents. Many of those houses entered the foreclosure process in December. The owners say their credit ratings are in the tank, and their lawsuit says Stonewood is to blame.

Dana Story, who has been asked to leave the house she rents on Via Alisol in Murrieta's Copper Canyon neighborhood, said she sympathizes with the owners' plight.

"But," she said, "I think the real victims are the families who are renting their houses, paying their rent in good faith."

Renters and owners say most of the owners gave 60-day notice, the legal standard for no-fault evictions.

Bob Pape, who lives on nearby William Place, said he got the phone call in late January. He still hasn't received formal written notice or a specific date when he'll have to leave.

"We're kind of in the dark, and so is the owner," Pape said.

The owners' lawsuit targets Stonewood chief executive Hendrix Montecastro; his mother, Helen Montecastro, who allegedly recruited investors from among co-workers at Rancho Springs Medical Center; Murrieta-area resident James Duncan; and Maurice McLeod. Other defendants include Jovane Investments LLC, registered to Duncan at an address in Orange; The Henson Group, an unregistered company that Duncan once operated from the same address; Sunburst Financial Systems Inc., registered to Chris Oetting in Palm Desert; and Pacific Wealth Management LLC, which is registered to McLeod at an address in Las Vegas but uses a Murrieta-area telephone number.

Tom Hargrove recently spent the morning of his 69th birthday at a nearby Starbucks, discussing his imminent eviction from a house on Falkirk Drive in Murrieta Hot Springs. A part-time marketing consultant who also runs a small cleaning business, Hargrove said he's optimistic that he and his wife will be able to find another house to rent within the Murrieta Valley Unified School District. Their oldest son is an 11th-grader at a local public high school and has lived in the district since first grade.

He said he's doesn't blame Vicky Reiss, who owns the house and four others that are now entering foreclosure. In court documents, Reiss alleges that she borrowed about $3 million to buy the houses.

Eduardo and Soledad Carrillo, a married couple who are among the plaintiffs, bought seven houses, including the two where Pape and Story live. They borrowed about $4.4 million to finance the purchases, which closed between March and June of 2005, according to the real estate database. Six of the seven purchases were brokered by Stonewood Consulting.

In addition to Reiss and the Carrillos, 17 other plaintiffs own between 100 and 140 houses that are now going into foreclosure, attorney Richard Ackerman said. About 75 of those houses are now occupied by renters who are being asked to leave, Ackerman said.

Another defendant in the lawsuit, Arbor Terrace Real Estate Inc., had acted as property manager for many of the houses, owners and tenants said. Late last year, the company abruptly backed out of management arrangements with the owners who are now suing, the owners and tenants said.

Hendrix Montecastro was a licensed officer of the company until Jan. 9, four days after the lawsuit was filed, according to the California Department of Real Estate.

In most cases, owners say they bought houses with little or no down payment.

Depending on how the lawsuit and negotiations with the lenders turn out, those buyers could take the biggest hit in terms of wrecked credit instead of large cash losses, Ackerman said. But many investors were also duped into other bogus investments ranging from overpriced Iraqi currency to short-term bank loans and cash advances on credit cards, the suit alleges.

Reiss said two of her tenants told her they would quit paying rent for their last few weeks in the houses. One explained his decision by saying that she had broken the lease and in any case wasn't making mortgage payments, according to separate interviews with Reiss and the tenant.

"I'm $3 million in debt," Reiss said. "What can I go after him for?"

Contact staff writer Chris Bagley at (951) 676-4315, Ext. 2615, or cbagley@californian.com.

Related stories:

Investors' legal battles span 5 years (2/11/2007)

Real-estate investors bought on faith (1/14/2007)

High-ball offers raised flags in 2004; Unusual investment patterns cited in lawsuit reported to authorities (1/10/2007)

Suit alleges massive mortgage scam (1/6/2007)