Major consumer protections are being put in place to prevent families who obtain federally-insured mortgages from being victimized by predatory lenders.

The fraud protection plan announced late last week by Sec. Andrew Cuomo of the Department of Housing and Urban Development also is designed to compensate hundreds of borrowers who have fallen prey to unscrupulous loan brokers that charged them thousands in unnecessary loan charges and stripped them of the equity they had in their homes.

Among other things, the Federal Housing Administration has been ordered to restructure inflated mortgages and offer default counseling for deceived borrowers. The agency also will deny insurance coverage on homes that have been "flipped" at inflated prices.

In addition, the government will deploy special investigative teams to track down corrupt appraisers and lenders and remove from the program appraisers who are involved with large numbers of foreclosures.

The program "will help those already victimized and help rid the housing marketplace of these abusive practices," said Cuomo.

At the same time, though, the HUD secretary, noting the explosive growth of predatory practices, indicated the mercenaries might still be a step ahead of the authorities. Hearings held around the country uncovered several new scams and schemes designed to defraud FHA borrowers and force them into poverty, he said.

But Sen. Barbara Mikulski, D-Md., who charged HUD with finding solutions to the problem after hearings in Baltimore found "the true horrors" of predatory lending, said the fraud protection plan is just a "first step."

Here is a more detailed rundown of the new program. In some cases, provisions will be available immediately on a national basis. In other instances, the FHA will launch test initiatives in Baltimore and other "hot spot" cities where defaults are abnormally high before rolling them out nationally:

Published: May 23, 2000

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