WASHINGTON -- FHA lenders who fail to modify loans can be hit with as much as $330,000 in penalties.

The housing agency recently issued a mortgagee letter reminding lenders that it can hit them with treble damages if they don't try to work with distressed borrowers.

The average FHA loan is $110,000--that means that if a service fails to offer loss mitigation, it can be hit with a $330,000 penalty, said FHA spokesman Lemar Wooley.

Wooley said FHA issued the mortgagee letter as an important reminder -- in the face of rising defaults and foreclosures -- of the requirement for effective loss mitigation and the consequences of failing to provide borrowers with support.

Earlier this year, Freddie Mac increased the financial incentive it pays servicers who help families avoid foreclosure and launched a "Mass Modification" pilot program in addition to its regular modification programs. Fannie Mae increased its financial incentives to lenders in July, offering $700 for loan modifications and $400 for repayment plans. FHA also offers incentives for loan modifications.