Desperation is powerful fodder for scams and a troubled and problem-plagued federal loan modification program offers added opportunity for scamming.

So it comes as no surprise that the New Jersey company that reached a settlement this week with the Idaho attorney general's office after being accused of defrauding homeowners with exaggerated loan modification pitches has been in trouble before -- and before that as well.

Idaho's attorney general, Lawrence Wasden, learned of the situation when a consumer complained about a direct mail solicitation by Best Interest Rate Mortgage Company (BIRMCO) that appeared to be a government form, entitled "Loan Modification -- Payment Reduction," and contained details of the consumer's home loan and information about the economic stimulus act. Only the small print said it was not being sent by a government agency.

Last month, BIRMCO was named in a similarly worded lawsuit in Pennsylvania. Last summer, it was named in a nearly identical suit in its home state and was included on a list of companies being watched by Colorado authorities as well.

In the two lawsuits and the Idaho legal action, BIRMCO was accused of offering to lower payments after consumers paid an upfront $1,000-plus fee. According to all three attorneys general, the homeowners typically ended up dealing directly with their own banks and ultimately received no modification or found themselves worse off.

One of the New Jersey consumers named in that state's suit, Vicki Hranj of New Egypt, was told by BIRMCO to stop paying her mortgage in order to qualify for a modification, according to the suit. Six months later, her payments rose by $200 a month and her loan debt was $28,000 larger due to missed payments and penalties.

In Idaho, the company agreed to refund $19,710 to 12 consumers and to stop operating in the state, but admitted no wrongdoing. The New Jersey and Pennsylvania suits are pending.

Wasden encouraged those seeking modifications to look for free programs through HUD-approved housing counselors and legitimate banks and brokers. He referred people to a publication on his office's Web site, Foreclosure Prevention and Foreclosure Scams: How to tell the Difference.

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