FTC Wants to Bar Upfront Fees by Mortgage-Relief Firms

Applying for a LoanThe Federal Trade Commission today proposed a new rule banning upfront fees by companies promoting mortgage modification services to rescue distressed homeowners from foreclosure.
The move is an attempt by the government’s consumer protection agency to shield homeowners from firms that accept hundreds, if not thousands of dollars, then fail to deliver.
The FTC has brought civil actions in 28 cases of alleged fraud in the mortgage-reduction service area. State and federal law enforcement agencies have cracked down on these firms in hundreds of additional cases.
Generally, the FTC or law enforcement charges these companies with failing to provide the services they promise , and often misrepresenting an affiliation with the government and its foreclosure rescue program, the Home Affordable Modification Program, HAMP, or Making Home Affordable, as it is labeled on the government’s website.
“Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise,” FTC Chairman Jon Leibowitz said. “The proposed rule would outlaw up-front fees so companies can’t take the money and run.”
Under the proposed rule, companies can not be paid until they present a documented offer from a mortgage lender or servicer “that lives up to the promises they have made,” the FTC said.
The proposed rule also would bar these firms from telling consumers to stop communicating with their lenders or mortgage servicers, and from misleading them about the following:
• The likelihood of getting the results they want, and how long it will take.
• Their affiliation with public or private entities.
• Payment and other existing mortgage obligations.
• Refund and cancellation policies.
In addition, the mortgage-relief providers would have to disclose to consumers that they are for-profit businesses and that neither the government nor the consumer’s lender has approved their services.
And they would not be able to guarantee that the lender will agree to modify their loan.
The FTC authorized publication in the Federal Register of the proposed rule, which has a 45-day public comment period ending March 29, 2010. Full instructions for submitting comments are found in the “Address section” of the Notice.

2 thoughts on “FTC Wants to Bar Upfront Fees by Mortgage-Relief Firms

  • Pingback:FTC doesn't get it - Mortgage Modifications and Short Sales demand attorney assistance | Mortgage-Mod-Monster

  • February 5, 2010 at 4:19 pm

    FTC Has no idea what is going on look at the real world. Lets put this into perspective. All over the world you have Doctors being shutdown sued for Mal Practice, however the ones who are doing a good job and obeying the rules arnt being banned from practicing medicine…. are they?? I think not this is totally un fair makes no sense what so ever. In fact why doesnt the FTC actually do something that makes sense, meaning take all the firms and look at the amount of mods that are done by them, and realize that without the firms these people are going to lose theif home’s left and right. THe new directive has made it compleltey impossible for the borrowers to do it on their own. Being that its such a delicate blend of not to much not to little information, and the banks probe the borrowers for information that disqualifies them instantley. FOr example after submitting financials correctley a debt collector calls borrower to be anoying as usual and says yes and what did you have for income and expenses…. Borrower replies “i dont know say 7,000 income about 8 expenses or no that doesnt make sense” Ohh but it does for the lender and they change the numbers and disqualify them from the program. If you look at the number of complaints in any buisness DOCTORS.. THE CITY.. POLICE OFFICER.. TEACHERS .. THERE WILL ALWAYS BE PEOPLE WHO COMPLAIN. However every service above is still around. WHy is it soo diffrent? Dr saves lives .. Real Estate settelment saves homes. Some people kill them selves or the process of modifying kills them, and im not kidding poeple just dont randonley die off at 45 when they are 14 months behind in their mortage. Its called stress, embarassment ( all the above you name it it causes poeple to go nuts) Martin Andelman put it best these borrowers are like grenades.. they try try try and keep trying sometimes 6-12 months on their own,then give up and hire a law firm. So by the time the borrower has failed on their own for 6-12 months now pass it off and maybe its only 2 months into the process which is usually 60-90 even 120 days however the borrower in distress acts as if the firm has the file for 12 months + additonal 2 they may have actually had it and blow up on you thinking nothing has been done etc. etc.. Yes they failed on their own for 12 months?? thats really fair. So again to quote Martin Andelman borrowers are like grenades when hiring a firm they pull the pin put them selves in your lap and can explode at any time. This ruling would affect more home owners negativley then the FTC can even imagine. Again ban all the doctors from practicing medicine because 100,000 of them get investigated for mal practive each year. That wouldnt make sense, either does this. Very scary / shocking.

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