WASHINGTON, Aug 17 (Reuters) - U.S. Democratic presidential candidate John Edwards said on Friday he plans to divest from his personal fortune any money tied to lenders who are trying to foreclose on the homes of Hurricane Katrina victims.

Edwards, who formally launched his campaign last year in a storm-battered section of New Orleans, was taking the action after The Wall Street Journal reported he held investments in lending units of the hedge fund Fortress Investment Group LLC <FIG.N>.

Edwards, who earned a fortune as a trial lawyer, worked for Fortress as an adviser after he lost his vice presidential campaign in the 2004 election.

His campaign said he would also take unspecified steps to help those individuals who are facing foreclosure by Fortress' units.

Edwards, whom polls show running in third place behind Hillary Clinton and Barack Obama in the race for the Democratic nomination ahead of the November 2008 election, has made a campaign issue of the swooning mortgage market. He has said he would end predatory lending practices and protect home owners.

Edwards was paid $479,512 in 2006 for consulting work for Fortress and had $16 million invested with the firm.

His campaign said Edwards would divest any holdings tied to lenders trying to foreclose on victims of the devastating August 2005 hurricane, but gave no specific figure.

An Edwards spokesman, Eric Schultz, said while some subprime lending is a valuable alternative for families with poor credit histories, some mortgages carry predatory terms.

"The distinction is sometime difficult to make, but John Edwards believes that nobody in New Orleans should lose their home because of Hurricane Katrina," Schultz said.

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