First, there were predatory lenders that put borrowers into loans they could never afford. Now, the federal government says loan modification companies are preying on homeowners in foreclosure, and Monday it vowed aggressive action to stop them.
The Obama administration's new anti–fraud initiative combines the efforts of state and federal government agencies to target the growing number of foreclosure rescue companies and dubious loan modification firms that are victimizing homeowners in distress.
Behind the federal effort, which involves more information and resource sharing among law enforcement and civil agencies, is a fear that Obama's recently enacted Making Home Affordable program will draw a new wave of shady profiteers. The Making Home Affordable program is expected to help between seven and nine million borrowers avoid foreclosure by refinancing or restructuring loans primarily through reducing interest rates and extending terms.
"We will shut down fraudulent companies more quickly than before. We will target companies that otherwise would have gone unnoticed under the radar. And we will increase our knowledge of how these companies operate, enhancing our efforts to identify and prosecute every individual involved in a mortgage rescue scam," Treasury Secretary Timothy Geithner said.
South Florida has witnessed a boom of start–up loan modification companies – including law firms specializing in foreclosure prevention and defense. Many of them are flourishing in a market teeming with delinquent borrowers and offer a needed service.
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