Officials say such scams are part of a broader problem that has grown since the bubble in housing prices began to deflate in mid-2006, and that has flourished since the recession deepened last fall.
"They've really blossomed in the last six months," Pastor Herrera Jr., director of the Los Angeles County Department of Consumer Affairs, said last week at the national assembly of the Consumer Federation of America.
Herrera said his office had investigated about 1,000 complaints against businesses that bill themselves as "foreclosure consultants" or "loan-modification" companies. He said that not all were complete scams, but that all preyed on people in financial trouble.
The irony, government officials say, is that the victims do not realize they have free access to a nationwide network of free counselors, trained and certified by the federal Department of Housing and Urban Development.
"Unfortunately, we have the perception as consumers that you get what you pay for," Herrera said.
The growth in scams also reflects the sheer size of the problem.
About three in 10 California homeowners with mortgages are "under water," real estate shorthand for owing more than a property is worth. Nationwide, 26 percent of homeowners with first mortgages were in that position in the fourth quarter of 2008, according to Moody's Economy.com. That included 24 percent of such homeowners in Pennsylvania and 18 percent in New Jersey.
Being under water on a loan puts a homeowner at risk in various ways. One is that without extra cash to pay off the loan, the owner cannot sell the property without defaulting. Another is that if something goes wrong with the home, the homeowner cannot borrow more to repair it.
