PHOENIX -- Four Phoenix-area residents who acted as "straw-buyers" in a foreclosure rescue scheme have agreed to pay $89,000 to settle a civil suit filed by Arizona Attorney General Terry Goddard's office.

Goddard's office alleged that Lin Liou, 47, of Chandler; XiaoFen Liu, 33, of Laveen; Liang Zhao, 44, of Chandler, and Qiao Zhu, 37, of Chandler, were "straw buyers" who obtained mortgage loans worth millions of dollars that were used to remove equity from the homes of people facing foreclosure.

Straw buyers are loan applicants used by scam artists to obtain home loans. They usually do not intend to occupy the properties they are buying or pay off the mortgages they obtain.

According to court documents, the defendants participated in a "foreclosure rescue" scheme designed to skim equity from properties of distressed homeowners for the defendants' benefit.

Prosecutors described how the alleged scheme worked. An operator would contact a homeowner at risk of going into foreclosure and convince the homeowner to use his "refinancing" assistance.

"Trustees" linked to the operator would take and convey legal title of the property to a "straw buyer," who would use his/her good credit to secure mortgage loans far in excess of the underlying debts. A loan officer would prepare and present false information on behalf of the straw buyers to lenders, and a closing agent would conceal and distribute the scheme's illegal proceeds to the defendants

Goddard's office alleged violations of the Arizona Consumer Fraud Act and the Arizona Racketeering Act, including the illegal conduct of an enterprise, a scheme or artifice to defraud, money laundering, forgery and theft in connection with the "foreclosure rescue" scheme.

The settlements, in the form of Consent Judgments, do not constitute a finding or admission of wrongdoing, Goddard said. They prohibit the defendants from:

Engaging in any misrepresentations or fraudulent activities in connection with obtaining financing for real estate purchases, or in purchasing or selling real property.

Providing false or misleading information to mortgage lenders regarding income, assets, or debt, misrepresenting to lenders the purpose for obtaining a mortgage loan, or misrepresenting to lenders the relationship between the parties to a real estate transaction.

The settlement requires the four defendants to pay the Attorney General's Office a total of $89,000. The money will be used to pay for consumer fraud education, attorneys' fees and investigation costs, Goddard said.