The U.S. Attorney's Office in Philadelphia filed criminal charges Tuesday against the operator of a local mortgage foreclosure rescue scheme involving $31 million in fraudulent loans on 120 properties.

Anthony J. DeMarco III offered to buy the houses of people facing foreclosure, allowing victims to stay in the houses and pay rent until they recovered financially and could buy the house back, the government said.

In reality, the indictment alleged, DeMarco's real estate companies, DeMarco REI Inc. in Philadelphia and OPM Group L.L.C. in King of Prussia, lined up straw buyers for the houses, used fraudulent documents to obtain mortgage loans, and stole $11 million in the process.

Authorities arrested DeMarco, 31, of Conshohocken, on Tuesday. He is being held pending a detention hearing Friday. His attorney, Chris Warren, did not return a call seeking comment. A call to DeMarco's residence in Conshohocken before the arrest was not returned.

Michael J. Saul, an alleged DeMarco victim in Spotswood, N.J., who says he lost more than $400,000 in the scam, was glad to learn from authorities of DeMarco's arrest.

Saul turned to DeMarco REI for help after a bankruptcy filing in 2005. DeMarco found a straw buyer, who allowed his credit profile to be used to get a 2007 loan on the house as a front for DeMarco. The difference between the new mortgage and the amount of money needed to pay off the old one supposedly went into an escrow or rent-reserve account for the homeowners.

In Saul's case, that amount, the equity in the house, was $147,900, Saul said, but it never went into a special account. Instead, the indictment said, DeMarco used that money and millions more obtained in the same way to run his operations and lead an extravagant lifestyle.

Saul and his wife paid $2,200 a month in rent for a year. After Saul's wife received a large legal settlement, the couple decided to repurchase the house.

They traveled to Philadelphia three times to pay the $245,000 needed to get their house back. "Every time we were up there, he made some kind of excuse," Saul said of DeMarco.

After the straw buyer, Martin Bronfman, asked for the money, Saul wired the $245,000 to DeMarco in March 2009, believing it was going into a business account to pay off the house.

Instead, the money went into a personal account held by DeMarco, who bought a Ferrari with it, according to the indictment. DeMarco, who filed for bankruptcy protection in April, has since sold the car, authorities said. He owed nearly $210,000 in back federal taxes, according to a bankruptcy document.

In what it called a novel move, the U.S. Attorney's Office on Tuesday asked U.S. District Judge Michael M. Baylson for broad relief that would stop evictions and foreclosures related to DeMarco's companies.

Robert P. Cocco, a Philadelphia consumer lawyer who has several cases pending against DeMarco, welcomed that effort. "It helps save the victimized homeowner the emotional and financial burden of foreclosure defense or stay of sheriff sale," he said.

Also charged in the 15-count indictment were DeMarco REI employees Michael R. Roberts and Eric Boscove, as well as Sean Ryan, a title agent at Settlement Engine Inc. of Pittsburgh. Ryan allegedly played a vital role in the scheme by helping to make fake the down payments needed for the loans.

Charges include conspiracy, mail fraud, bank fraud, and money laundering.

Only Ryan could be reached Tuesday. Contacted at his work number, he said: "No comment."

Contact staff writer Harold Brubaker at 215-854-4651 or hbrubaker@phillynews.com.