MURRIETA -- A mortgage broker whose clients are losing more than 100 local houses to foreclosure has agreed to surrender his real estate license, according to filings by a state agency.

The Department of Real Estate will revoke Hendrix Montecastro's license July 9, under a settlement the two parties reached earlier this month. Montecastro neither disputed nor admitted the agency's accusations that he and his company, Stonewood Consulting Inc., arranged inflated appraisals, failed to account for clients' money, and concealed fees on loans and real estate transactions as high as three times industry standards.

Former clients have filed a total of six lawsuits alleging that Montecastro convinced them to buy multiple houses with 100 percent financing. Excess cash from the mortgages -- typically $50,000 to $100,000 for each house -- was to be rolled into high-yield investments that couldn't lose, according to the lawsuits.

But the investors never received a return on that money and they allege that Montecastro and several business partners broke promises to help cover the mortgage payments last summer, triggering a series of default notices from lenders.

One set of clients dropped their lawsuit last week. Another set of clients has also agreed to drop their claims, according a Montecastro attorney.

An attorney representing more than three dozen other clients continues to press a series of lawsuits against Montecastro and Murrieta-area residents James Duncan and Maurice McLeod. The Temecula attorney, Rich Ackerman, said he believes the state agency's action is likely to bolster his case against the three men and several other people who allegedly worked with them.

"At some point in time, I'm going to ask them, 'Do you have a real estate license?' and the answer is going to be 'no,'" Ackerman said Friday. "And when I ask them why, they're going to say 'because I surrendered it to avoid litigation' with the Department of Real Estate."

The Department of Real Estate brought its accusation against Montecastro May 23. It filed the settlement June 18.

Montecastro can technically reapply to have his license reinstated, said Tom Pool, a spokesman for the department. But such reinstatements are rare, Pool added.

Of the 504,000 agents who held valid licenses during the 2005-06 fiscal year, 395 had their licenses revoked, according to department statistics.

Bill Sauls, the San Diego attorney who represented Stonewood before the state agency, didn't respond to requests for comment Friday. Montecastro hasn't responded to numerous calls seeking comment since the first lawsuit was filed Jan. 5.

An attorney defending Montecastro against the lawsuits said there wasn't any merit to a suit that a couple settled last week or one that another couple dropped earlier.

"Stonewood and Hendrix Montecastro paid nothing and gave up nothing," Riverside attorney Scott Grossman wrote in an e-mail. "The plaintiffs, I assume, came to realize that they just weren't going to win."

Ackerman said he suspects the four plaintiffs simply couldn't afford to pursue the cases. He said his own clients in the matter are being billed at discounted rates that are then divided among 40 or more plaintiffs.

It isn't clear whether Montecastro or Stonewood have remained in the real estate industry. Montecastro and his wife have sold the house on Horsetail Street where Stonewood operated until mid-January.

Ocean Ridge Equity Inc., another company named as a defendant in one of the lawsuits, continues to operate at an address in San Diego's Carmel Valley neighborhood. The company listed Montecastro as its licensed officer until earlier this year, and several of its employees had either worked for Stonewood Consulting or approved loans for Stonewood clients while working in the San Diego office of a national subprime mortgage lender, according to others who previously worked for the lender.

Real estate agents described Stonewood's operations from 2004 to 2006 as highly unusual. Stonewood would typically seek out agents whose listed houses had remained on the market for a month or more, agents said. Without arranging for clients to see the houses, Stonewood would then offer as much as $120,000 above list prices, agents said, with fine print later specifying that 10 percent to 20 percent of the sale price would go back to the company as commission.

The arrangement seemed to target sellers who might be eager to move on without asking too many questions, agents and neighbors said, noting that a historic boom in local real estate values had just begun to ebb.

Managers of several offices warned their agents against dealing with the company. Without mentioning Stonewood by name, a senior official with the Southwest Riverside County Association of Realtors warned the group's members in a meeting during that time to avoid the sort of highball offers for which Stonewood and several smaller real estate companies had become known.

Lenders began seizing the homes of delinquent Stonewood clients last month, in some cases forcing out renters.

At least two neighborhoods where the company focused its operations have been hollowed out: On several streets in the Copper Canyon area of western Murrieta and several others around the SCGA golf course in eastern Murrieta, notices of "bank-owned property" are displayed in front-facing windows and alongside "for sale" signs. Between 100 and 150 houses appear to be involved, based on interviews with former owners and a semi-public real estate database.

It isn't clear to what extent the foreclosures could have on home prices in particular neighborhoods, though median prices in Murrieta have fallen about 15 percent since peaking above $500,000 in May 2006, compared to one-year declines of 3 percent to 10 percent in most parts of Lake Elsinore, Menifee and Temecula, according to DataQuick Information Systems, a research firm.

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

See also:

State agency targets mortgage brokerage

Sixth lawsuit alleges money laundering

New player emerges in fraud suits

Scope of alleged scam grows

Investors' legal battles span 5 years

Renters latest victims of alleged scam

Real-estate investors bought on faith

High-ball offers raised flags in 2004

Suit alleges massive mortgage scam