WASHINGTON — Federal Reserve Chairman Ben Bernanke said Thursday that he did not believe the growing number of mortgage defaults would seriously harm the economy.

Facing criticism from members of Congress about lax regulation, Bernanke also promised that the Fed would do everything possible to crack down on abuses that have put millions of homeowners in jeopardy of defaulting on their mortgages.

“We at the Federal Reserve will do all that we can to prevent fraud and abusive lending and to ensure that lenders employ sound underwriting practices and make effective disclosures to consumers,” Bernanke said in remarks prepared for a financial conference in Chicago.

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The Department of Housing and Urban Development, or HUD, is warning consumers about two separate offers that are going around.

One is a work-at-home offer to become a “Refund Tracer.”  Consumers report getting job offer postcards in the mail from companies boasting high starting pay and benefits to process government insurance FHA refund notices.

On its Web site, HUD reminds consumers that the Department does not have a financial relationship with third party tracers nor does HUD authorize disclosure of a homeowner’s information other than that which is available under the Freedom of Information Act.

HUD is also warning consumers to be careful about any literature or soliciations stating that a chance in HUD’s, FHA’s or the government’s policy will prevent you from receiving your FHA refund and that you should call their office immediately.

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Fraud, abusive lending crushes dreams for millions of home owners

Mark and Kerrie Russo, a Jackson, N.J., couple raising two young daughters, are struggling to hang on. Less than a year after buying a home in 2005, which they financed with a 30-year fixed rate loan based on a solid credit history, a local mortgage broker began sending letters offering to refinance their loan. A new product, the sales pitch said, allowed home owners flexibility to choose from a menu of different payments from one month to the next.

What the broker didn’t explain, Kerrie Russo says, is that this was a “negative amortization” loan — an expanding debt that buried the couple deeper in hock even as they thought they were paying down their mortgage balance.

Like many borrowers who were sold mortgages they couldn’t afford, Russo says that when she called the broker to complain, she was told that because she failed to read the fine print, the responsibility for getting in too deep was hers.

After coming up with about $14,000 to get out of the downward spiral into yet another loan, Russo says she’s learned an important lesson.

“I have learned a new term called ‘predatory lending,’” she said. “And that is what I am a victim of.”

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