WASHINGTON (Reuters) - Fraudsters are using the publicity around foreclosure-prevention plans to lure desperate homeowners into costly scams, the U.S. Treasury Department said on Monday.
As the housing crisis has intensified and the government has hatched several plans to aid troubled borrowers, the number of mortgage scams has mushroomed, several government agencies said at a press conference.
“American homeowners desperately need the relief this program offers, but the very last thing they need is to be taken advantage of as they try to hold on to their homes,” Treasury Secretary Timothy Geithner told reporters.
Fraudsters typically charge troubled borrowers an up-front fee to help them get relief from burdensome housing payments but fail to deliver any aid.
The Federal Trade Commission, a consumer-protection agency, has targeted several fraudulent companies with names that sound as if they are affiliated with the government. A company called “Federal Loan Modification Law Center,” for instance, has been targeted by the FTC for exploiting troubled borrowers.
According to the FTC, the center charged consumers as much as $3000 in cash but did very little work trying to secure new loan terms from the lender.
The Treasury’s fraud investigation unit said that it found nearly 180,000 suspected cases of mortgage fraud between July 2002 and July 2008.
A senior administration official said policy-makers are not concerned troubled homeowners will exploit existing aid programs because sufficient safeguards are in place.
“The focus of the loan modification efforts is going to be on getting people into affordable mortgages. It will be done in a way that requires full documentation of income and quite-stringent data collection,” the official said.
A bigger concern, the official said, is scam artists who would prey on troubled borrowers.
President Barack Obama has said his administration could help lower mortgage payments for as many as 9 million homeowners under a rescue package announced in February.
Borrowers would spend no more than 31 percent of their income on mortgage payments and other borrowers would get help wining a new mortgage rate.
While the interest rate on a 30-year loan is at a record low, many homeowners are not able to refinance because their property has slipped in value.
Reporting by Patrick Rucker; Editing by Andrea Ricci
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