US rolls out plan to fight loan schemes that prey on distressed homeowners

As the country's foreclosure rate rises, companies have popped up offering to help borrowers save their homes. But their fees, which can reach thousands of dollars, do not guarantee results and many of the programs are scams, officials said.

In particular, state and local officials and consumer advocates are concerned unscrupulous people could take advantage of homeowners looking for help through the administration's foreclosure prevention plan, Making Home Affordable. That plan calls for lenders to receive a federal subsidy in return for lowering a homeowner's monthly payments to affordable levels.

Treasury Secretary Timothy Geithner said at a news briefing that federal agencies, including the Justice Department and Federal Trade Commission, will align responses to protect homeowners. Treasury's Financial Crimes Enforcement Network will be issuing an advisory to help lenders spot loan modification scams and streamline and coordinate law enforcement efforts. NeighborWorks, a housing nonprofit group, is preparing a $6 million outreach program to alert homeowners to the scams.

Sometimes, the scams use names similar to legitimate groups offering help. For example, many companies use the word "hope" in their title, similar to Hope Now, an alliance of mortgage lenders, and Hope for Homeowners, a foreclosure prevention program run by the Department of Housing and Urban Development, according to federal officials.

But the services provided by Hope Now and many nonprofits are free, said Faith Schwartz, the head of the nonprofit group.