Officials from FHA also say they will send a special team of about 60 agents to the city to ensure that lenders and mortgage brokers who make the federally backed loans are following legal guidelines.

The FHA says most of the troubled loans are in two areas it describes as "hot zones." The first runs along the Harbor Freeway, between the Hollywood Freeway and Gardena Freeway. The second covers a relatively small portion of Long Beach.

Most of the neighborhoods in those areas are predominately occupied by low-income persons and immigrants. The default rate on FHA loans in some of those communities tops 15%, compared to a countywide average of only 3.6%, the government says.

Many of the defaulted apartment and home loans were made by fly-by-night brokers or relatively small lending institutions that charged usurious rates or extremely high origination fees, the FHA says. Most of the borrowers didn't realize they were getting such poor loan terms because they speak little or no English or because "they were new to the mortgage process and didn't realize what a rotten deal they were getting," an FHA spokesman says.

The FHA says it will deal with each borrower's problems on a case-by-case basis. Options include re-writing the loan terms or substituting a new loan for the old one. Brokers and lenders who didn't follow FHA guidelines can be barred from further participation in the federal program and may face criminal charges, the FHA spokesman says.

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