Nationwide reports of schemes that capitalize on the federal government’s new mortgage assistance program have led to a multi-agency effort to crack down on mortgage relief scams. Federal, state, and nonprofit agencies have teamed up to aggressively pursue mortgage loan modification fraud and foreclosure rescue scams that are hurting American homeowners.

The goal is to keep criminals far away from the Obama administration’s Making Home Affordable program, which is designed to help homeowners in trouble. The program would help up to nine million families restructure or refinance their mortgages to lower their monthly payments and make their mortgages affordable.

The joint press conference April 6 brought together the U.S. Department of the Treasury, the Department of Justice (DOJ), the Department of Housing and Urban Development (HUD), the Federal Trade Commission (FTC), and the attorney general of Illinois. There were strong statements all around as they announced new initiatives to coordinate information about fraud investigations, to alert financial institutions to emerging schemes, to step up enforcement actions, and to educate consumers about other ways to get help and avoid scams.

The FTC said that after surveying online and print advertising for mortgage foreclosure rescue operations nationwide, it identified 71 companies running suspicious ads. Also, Treasury’s Financial Crimes Enforcement Network (FinCEN) found that between July 2002 and June 2008, financial institutions filed nearly 180,000 mortgage fraud suspicious activity reports (SARs).

FTC Chairman Jon Leibowitz said his department has filed five new cases against companies that used deceptive tactics. This brings to 11 the number of similar scams brought by the FTC in the last year. The agency has also sent 71 warning letters to companies that have engaged in deceptive marketing tactics. “We’re telling them to either knock it off or we’re going after you,” he said.

The FTC released a list of more than 20 states that have already taken law enforcement action on loan modification or foreclosure rescue scams. Illinois Attorney General Lisa Madigan has filed 24 related lawsuits to date, proving, she said, that “foreclosure rescue operators don’t help. They don’t call your lender, they don’t modify your loan, and they don’t represent you in court if you’re in foreclosure. All they do is take your money.” She has also sent out 60 warning letters to companies.

The FTC says companies perpetrating these schemes typically do the following:

1. They use terms like “guarantee” and “97% success rate” to describe their services.
2. They charge up-front fees for these services—fees that legitimate nonprofit organizations do not charge.
3. They use copycat names or look-alike Web sites to appear to be a nonprofit or government entity.
4. Often, after collecting the fee, they do little or nothing to help consumers.

At the press conference, Attorney General Eric Holder painted a desperate picture for homeowners facing not only mounting financial problems but also “unscrupulous actions of individuals and companies who exploit the misfortune of others” through these scams. He said the FBI is investigating more than 2,100 mortgage fraud cases, up almost 400% from five years ago.

He emphasized, too, that lending discrimination—through inequities in loan modification opportunities as well as terms and fees for such loans based on race or circumstances—would not be tolerated.

“My message is simple,” Holder said. “If you prey on vulnerable homeowners with fraudulent mortgage schemes, or discriminate against borrowers, we will find you and we will punish you.”