HARRISBURG — Pennsylvania Attorney General Tom Corbett filed a lawsuit Friday seeking restitution for hundreds of homeowners who said they were victimized by the owner of a defunct mortgage company who was convicted of fraud.

The civil lawsuit alleges Reading-based broker Wesley A. Snyder, his wife and seven employees violated state consumer-protection laws when they cheated customers in central and eastern Pennsylvania out of nearly $40 million in an extensive Ponzi scheme.

Corbett said he filed the lawsuit in response to more than 700 complaints his office received. Most were Pennsylvanians, but a handful came from Arizona, Delaware, Florida, Maryland, North Carolina and South Carolina.

"The defendants were in the business ... of trying to sell dreams to consumers — the dream of lower interest rates, the dream of paying off their mortgage early, or the dream of larger returns for their investments," Corbett said during a news conference at his Harrisburg office.

Snyder's customers took out low-interest "equity slide down" or "wraparound" mortgages through his businesses. The deals usually required them to borrow more than they needed to pay off their previous mortgages, then give the difference to Snyder's firms to invest.

But Snyder never used the extra money to pay down mortgages and what little he invested yielded poor results, federal prosecutors in his criminal case said; most of it went to keep his businesses afloat.

As a result, hundreds of customers learned their mortgage balances were larger than they believed, and lenders were demanding larger payments. Many who thought their mortgages were paid off found they still owed hundreds of thousands of dollars.

Snyder also engaged in a pyramid scheme by using cash from new customers to pay the monthly mortgage bills of existing customers, prosecutors said.

Snyder and his companies marketed "loan participation agreements" to consumers as alternatives to certificates of deposit, touting annual interest rates as high as 14 percent, Corbett said.