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Video: Investigators: Alleged foreclosure rescue scam goes to court

BELLEVUE, Wash. - Karen Handlin has been narrowly saved from eviction - for now.

She's filed a first-of-its-kind lawsuit in Western Washington to save the house her family has owned for 35 years.

Handlin almost lost it to foreclosure and then, she says, to a company called Alternative Investors, which claimed it could rescue her from foreclosure.

"I feel robbed. I feel lied to. I feel deceived. I feel kind of stupid, too, although I'm told this happens to other people," said Handlin.

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Foreclosure rescues have victimized many homeowners since the KING 5 Investigators first exposed the scheme several years ago.

In May 2005, our undercover camera watched two men tell an Issaquah woman how they could save her from foreclosure by buying her house and renting it back to her. It was a complicated transaction, but the men promised to help fix her credit and ultimately sell the home back to her.

"I would have done it, and I'm not you know, I would have done what I had to do to save my house and I would have ended up losing it," Toni Nielsen told us back then.

That's what often happens because the rescuers buy the home at a bargain rate, evict the homeowner and then sell the house for big profits.

Sure enough, Karen Handlin's family got an eviction notice when they couldn't make their rent payments.

While the Handlins suffer, the woman they say did this to them lives the good life in a $4 million mansion just a short distance away from the world's richest man in Hunts Point.

When we went to Michelle Merceri's mansion Friday night, she refused to answer any of our questions.

The Handlins will face Merceri in civil court, where a new law offers homeowners more protection from the theft of their home equity.

"If she's living off ill-gotten gains, she's as much a crook as someone who robs a bank," said Handlin.

The defendants have agreed not to evict the Handlins while this landmark case proceeds to trial.

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