UPDATE 1-U.S. agencies pledge crackdown on mortgage fraud

* FTC weighs ban on upfront mortgage modification fees

* FTC files complaints against two firms for schemes (Adds comments, details, background, byline)

By David Lawder

WASHINGTON, Sept 17 (Reuters) - Calling fraudulent mortgage rescue schemes an "epidemic," several U.S. federal and state agencies pledged on Thursday to ramp up efforts to investigate and crack down on abuses as many Americans scramble to avoid foreclosure on their homes.

The U.S. Treasury, Justice Department, Department of Housing and Urban Development, and Federal Trade Commission said they plan to alert financial institutions to emerging schemes, step up enforcement actions and educate consumers.

With concerns about scams growing, FTC Chairman Jon Leibowitz said his agency would consider stricter rules to cover all aspects of the "mortgage life cycle" from fees and advertising to appraisals and servicing.

"In particular we are going to closely examine whether to ban upfront fees for mortgage modification services as several states have already done," he said. "Because very often, if they're asking for advance fees, ... it's a red flag that the service is bogus."

He said the FTC planned to propose draft regulations by the end of this year.

The Federal Bureau of Investigation said on Wednesday it has over 2,600 mortgage fraud cases open, most of which involve losses of more than $1 million. That is more than a three-fold increase in the last three years.

Home foreclosure filings, which include notices of default, auction and bank repossession, hovered near a record high last month, with one in every 357 U.S. households with loans getting such a filing, according to real estate data firm RealtyTrac.

HUD Secretary Shaun Donovan said the administration was on track to reach its goal of getting 500,000 mortgages modified with reduced monthly payments by Nov. 1, and would press to increase modifications further.

TWO NEW ENFORCEMENT ACTIONS

The FTC also announced new enforcement actions against two firms for allegedly charging large up-front fees but doing little to help the homeowners modify their mortgages or stop foreclosure. The FTC has now brought 22 such cases.

The agency said it is seeking to stop the firms from making deceptive claims about helping clients and will demand they forfeit any ill-gotten gains.

As the Obama administration has ramped up foreclosure prevention programs, the threat of fraud has risen. The programs provide generous incentives to loan servicers to reduce monthly payments to keep struggling borrowers in their homes.

"A clear lesson of this financial crisis is that American consumers need better protection against fraud," Treasury Secretary Timothy Geithner said. "While we prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond."

The four federal agencies said in a joint statement that they were committed to curb abuse by coordinating information and resources to improve the overall effort to combat fraud.

"Mortgage rescue scams are becoming an epidemic -- preying on families facing foreclosure in exploding numbers," said Connecticut Attorney General Richard Blumenthal.

"These mortgage rescue scams raise false hopes and then cruelly exploit them, which is why my office is fighting them and welcomes the federal government as a strong ally," Blumenthal said. (Additional reporting by Jeremy Pelofsky and Lisa Lambert; Editing by James Dalgleish)