MURRIETA -- An unusual pattern of investments raised concern long before it became the target of a lawsuit last week and the subject of an investigation by the Riverside County district attorney's office, neighbors and real-estate agents said Monday.

The series of investments appeared to begin as early as 2004, when a mortgage brokerage began faxing out above-market offers on dozens of homes, agents said. The offers were typically for $80,000 to $100,000 above asking prices, targeted homes that had remained unsold for several months, and came primarily from Stonewood Consulting Inc., a mortgage brokerage that operated out of a house north of Clinton Keith Road in Murrieta, the agents said.

Stonewood and its president, Hendrix Montecastro, are not named as defendants in the suit, but they, family members and others appear to have worked closely with Jovane Investments LLC, Temecula attorney Richard Ackerman said. Ackerman filed the suit Friday in Riverside County Superior Court against Jovane on behalf of a Temecula woman who invested in the arrangement.

Montecastro and Stonewood attorney Bill Sauls didn't return calls or e-mail messages seeking comment Friday and Monday. James Duncan, of Orange-based Jovane, declined to comment when reached by cell phone Monday.

Ackerman said Sauls had denied a connection between Jovane and Stonewood.

Earl Bonawitz, general manager of Century 21 Wright in Temecula, said he personally received six such offers and had talked to numerous other agents who also had.

Stonewood would fax out several shockingly high offers in the same neighborhood on the same day, said Gene Wunderlich, a director of the Southwest Riverside County Association of Realtors. The association reported the pattern of offers to the Riverside County District Attorney about two years ago, Bonawitz and Wunderlich said.

Unusually high offers are legal and not necessarily risky for the seller, but managers at several real-estate offices advised their agents to err on the side of caution, Bonawitz said.

Kevin and Janet Quigley said at least four such deals happened in their Copper Canyon neighborhood, where two- and three-car garages open up to boulder-flecked hillsides to the west and sweeping views of Murrieta to the east.

One neighbor was happy to receive her asking price of about $600,000 but peeved when she learned that the sale was officially recorded at about $700,000, Janet Quigley said.

"It's overinflating the market," Quigley said.

Wunderlich and Bonawitz acknowledged that such deals could inflate real-estate values in neighborhoods where they're concentrated. Ackerman said he worries that the deals may have set up property values for a fall.

Both agents and Ackerman said they believe the deals may have relied on some sort of cooperation from appraisers who were involved. Quigley said several suspect deals appeared to have been handled by the same real-estate agent.

The deals were allegedly set up with an initial promise that Jovane and related companies would cover the monthly mortgage payments. The payments suddenly ceased in October and November, leaving the clients with defaulted loans, the lawsuit alleges.

Ackerman, another attorney and a San Diego financial adviser said their clients had defaulted on a total of perhaps two dozen loans. Ackerman said Montecastro told investors that they were among 412 people who were participating. Ackerman's client bought five houses as part of the deal, the suit alleges. Other investors bought between two and eight houses, according to the lawsuit and another attorney whose clients allegedly took part.

Given the number of offers that Stonewood allegedly faxed out, 412 investors very well could have taken part, Bonawitz said.

In addition to the four sellers who took advantage of the unusually high offers, Quigley pointed up and down her street to another half-dozen houses that sold at around the same time and are now either being rented or are up for rent. In the front yard of one, the grass had grown long and brown, and several weeks worth of advertising fliers were strewn across the porch. In between two of them, Quigley said, the owner had gotten fed up and decided to move away. His house is now for sale.

In front windows of two houses on neighboring streets, lime-green signs read "Newly built single family house for rent or lease with option to buy. Low rent. Low deposit."

"It's ruining our neighborhood," Quigley said. "There are a bunch of people on our street that aren't happy."

Ackerman said he filed the suit in part to keep lenders from foreclosing on his client, who now is on the hook for about $20,000 in monthly mortgage payments, far beyond her salary as a hospital nurse. He filed the lawsuit with his client listed as anonymous, because he said she has received threats over the telephone.

The plaintiff's name is known to the judge in the case and to investigators for the Riverside County District Attorney, who began to investigate the matter late last year, Kelly Hansen, a senior supervisor in the office, said Friday.

Four lenders are named as defendants in the suit, which seeks to delay foreclosure and collection attempts. It also demands monetary damages from Jovane and Duncan.

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)

Renters latest victims of alleged scam (2/10/2007)

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

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