FTC, US states crack down on loan modification scams

LOS ANGELES, July 15 (Reuters) - The U.S. Federal Trade Commission and authorities in 20 states have sued dozens of individuals and companies as part of what they said on Wednesday was a crackdown on loan modification scams that have multiplied in the housing meltdown.

The 189 lawsuits and other court actions target the "con artists" who offer to help homeowners facing foreclosure, only to take up-front fees and perform little or no service.

"Its an operation full of hollow promises designed to fatten the pockets of criminals and con artists," FTC Chairman Jon Leibowitz said in announcing the move at a press conference in Los Angeles.

"These con artists see the high foreclosure rates as an opportunity to prey on people in distress," Leibowitz said. "They promise to rescue homeowners in troubled financial waters but after they take their money they throw them an anchor instead of a lifeline."

U.S. mortgage fraud reports jumped 36 percent last year as desperate homeowners and industry professionals tried to maintain their standard of living from the boom years, the U.S. Federal Bureau of Investigation said last week, calling fraud rampant and growing.

Leibowitz said that many who offer loan modification schemes deceive homeowners by posing as quasi-governmental agencies or implying that they are working with federal agencies and cautioned consumers to be aware of the scams.

California Attorney General Jerry Brown said his office had sued 21 individuals and 14 companies accused of scamming homeowners, saying that many of the operations were based in Orange County, south of Los Angeles.

Brown said bogus loan modification scams had proliferated widely following the subprime meltdown and housing crash, to the point where authorities with limited resources were unable to effectively pursue all of them.

"We're going to do everything we can to stop it, realizing that there are more of these rats that come out of their holes than we can stomp on," Brown said. "This is one of the more egregious wrongs we see committed in society and we are going to fight it." (Additional reporting by Diane Bartz in Washington; Editing by Bill Trott)