FEATURE-Rescue scams trap ever more desperate US homeowners

TREASURY, CITIES SOUND ALARM

Describing the proliferation of fraudulent mortgage rescue schemes as an "epidemic" on Sept. 17, the U.S. Treasury, Department of Justice, the Department of Housing and Urban Development and the FTC announced they would work together to target investigations and increase their efficiency.

"A clear lesson of this financial crisis is that American consumers need better protection against fraud," U.S. Treasury Secretary Timothy Geithner said in a statement.

The city of Los Angeles now bans upfront fees for mortgage loan modification services in a bid to combat rescue scams.

Ultimately, educating homeowners about scams is more effective than trying to catch smart and mobile thieves, said John Brady, housing policy coordinator in the office of Mayor Antonio Villaraigosa.

FTC spokesman Frank Dorman said the commission is considering a possible nationwide ban on advance fees for loan modification and foreclosure rescue services.

"Combating mortgage relief scams is one of the FTC's top priorities," he said.

Lori Gay, president of nonprofit lender Neighborhood Housing Services of Los Angeles, welcomed moves to target rescue scams and increased attention from the FBI.

"More than half of the people who walk through our door seeking help have given money to criminals," she said. "Those frauds even advertise on television and the radio. If you hear five commercials an hour offering help, four will be fake.

"It's become a big business. I'm just glad that the authorities are waking up to the problem and doing something about it. I want more of these people behind bars."

(Editing by Mary Milliken)