US getting tough on mortgage scammers

The Justice Department, US Treasury and other agencies said they are taking action to confront "bottom feeders" of the mortgage industry who prey on borrowers facing foreclosure.

The efforts to combat fraudulent schemes that are promoted as official US Government programmes include filing civil lawsuits, educating homeowners about mortgage-relief scams and directing borrowers to "legitimate" counselling services.

The Housing and Urban Development Department, Federal Trade Commission (FTC) and state officials are also involved.

President Barack Obama's programme to help as many as nine million Americans refinance or modify their mortgage has been targeted by companies with deceptive names and logos that mislead borrowers into paying for help that is never provided.

The FTC said it had sent warning letters to 71 companies running suspicious foreclosure-rescue operations.

"These companies are kicking people when they're down, charging enormous upfront fees and sabotaging efforts by homeowners who could be getting help for free," FTC Chairman Jon Leibowitz said.

He called them "the bottom feeders of the foreclosure crisis".
Leibowitz announced five civil cases, including a lawsuit that seeks an emergency court order to stop the operations of the Federal Loan Modification Center in Irving, California.

"These companies gave homeowners false hope," Leibowitz said.

Attorney-General Eric Holder said companies will face criminal prosecution if they "discriminate against borrowers or prey on vulnerable homeowners with fraudulent mortgage schemes".

- BLOOMBERG