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WASHINGTON - How's this for a business plan to make money during the housing bust: You buy or rent lists of recent default filings from across the country - thousands of people who have been notified by lenders that if they don't get their mortgage payments back on track, the next step will be foreclosure.

You send each homeowner a personalized letter with this urgent message: We know you're having a tough time right now, but WE CAN SAVE YOUR HOME! It's not too late! We know how to get through to your lender and work things out to save your house. Call this toll-free number immediately!

The letters go to rich people and poor people, owners of homes big and small - and they generate hundreds of callbacks. Many panicked owners agree to pay a fee of $1,200 to $1,300 for the foreclosure prevention services in advance.

You can guess what happens next: little or nothing, in most cases. The homeowners lose their houses to foreclosure, and the rescue company keeps sending out letters and pocketing fees.

Late last month, the Federal Trade Commission settled with a Dunedin-based company - United Home Savers LLC - that allegedly operated like this, taking advantage of more than 3,100 homeowners nationwide. The company and its officers denied any legal wrongdoing as part of the settlement, but have shut down the firm and agreed to a $4.1 million judgment and close monitoring by federal officials of their future business activities. Most of the judgment was suspended because United Home Savers and its principals had only about $22,000 in their bank accounts when the FTC froze their assets under court order. (United representatives could not be reached for comment.)

The 3,100 victims, in other words, probably won't see a dime in restitution.

"What really hurts," says Harold Kirtz, the FTC lawyer who led the government's case against United Home Savers, "is that a lot of these people not only lost money upfront, but they also fell further behind on their mortgages" during the weeks and months while they waited for United's staff counselors to work things out with their lenders.

That, in turn, made foreclosure for the homeowners even more likely.

But United is just one of literally hundreds of alleged foreclosure rescue operations that have prospered in the toxic wasteland of the mortgage market bust. Reilly Dolan is familiar with many of them. He is the FTC's assistant director for financial practices and the coordinator of "Operation Loan Lies," a joint federal-state effort that has targeted 189 companies allegedly running mortgage modification or foreclosure prevention scams. The FTC alone has brought or settled 19 cases against firms of this type in the past 12 months, said Dolan in an interview. "And more are coming."

"This is now one of the top priorities" at the FTC, Dolan said, because the sheer breadth of mortgage foreclosure problems "has caused a lot of scams to come out of the woodwork."

Kirtz, who is based at the FTC's Atlanta office, said even well-educated, financially knowledgeable consumers can fall prey to loan modification and foreclosure prevention ripoffs because "they are in a very vulnerable state," threatened with the loss of the roof over their head. As a result, they don't ask the questions they should, and they don't look for the clear warning indicators of potential fraud. What telltale signs should tip off financially distressed homeowners?

- If the company claims to be able to guarantee success in preventing foreclosure, no matter what your financial situation or mortgage details, don't listen further to the marketing pitch. Nobody can guarantee you'll get a loan modification, and nobody can guarantee that your lender won't pull the plug and foreclose.

- Although there is no federal law against collection of upfront fees for loan modification assistance - unlike so-called credit repair operations, where fees are prohibited until services are completed - any company asking for $1,000 to $4,000 in advance should be checked out thoroughly by the homeowner before sending in any money.

"We can't say all advance fees are illegal," said Kirtz. But when the fees are for things like "processing" and "administration" costs, "in most case they're probably bogus."

- Finally, mortgage modification companies that claim to have special inside connections allowing them to make your payments directly to your lender - provided you send your monthly checks to the modification company, not to your regular service provider - are almost certainly intent on just one thing: Cashing as many of your checks as possible, pocketing the money, and leaving you unprotected on the conveyor belt heading for foreclosure.

Ken Harney can be reached at