Wednesday, April 6th, 2011, 4:33 pm

Four fair housing organizations released findings Wednesday from a yearlong undercover investigation uncovering loan modification scammer-tactics victimizing homeowners.

The report, issued by The National Fair Housing Alliance, The Connecticut Fair Housing Center, Housing Opportunities Made Equal of Virginia, and the Miami Valley Fair Housing Center, was compiled after 80 loan modification companies were investigated.

"This is shameful abuse by loan modification scammers to take advantage of desperate homeowners," said Shanna Smith, NFHA president and CEO. "We and our partner organizations will work to see to it that these companies are prosecuted by the Federal Trade Commission and other federal and state enforcement agencies."

With one in nine homeowners nationwide more than 90 days behind on their mortgage payments, mortgage modification and foreclosure prevention is a lucrative industry, according to the release.

According to the report, investigators working on behalf of the fair housing organizations captured scammers saying, "I’d be breaking the law if I told you to stop paying your mortgage, but friend-to-friend, you won’t get a loan modification until you are behind on your mortgage."

Another scammer was caught saying if the buyer doesn’t qualify, they would modify expenses for them.

"They [the lenders] don’t check it," one scammer said. "No one knows what you spend on groceries.  We make you qualify by playing with the numbers."

Some of the common scammer tactics revealed in the report include:
• 55% required an upfront fee to start work or required a low initial fee to conduct minimal work on behalf of distressed homeowners, such as reviewing loan documents;
• 43% guaranteed or promised they could secure a loan modification even before learning about the homeowners’ financial limitations;
• 24% advised or encouraged homeowners to stop making their mortgage payments or to stop contacting their lenders;
• 16% guaranteed a new, much lower interest rate ranging between two and 6 percent on modified loans;
• 12% discouraged homeowners from seeking free help from government-approved housing counseling agencies;
• 8% encouraged homeowners to provide fraudulent information to their lenders.

Write to Shaina Zucker.