Loan modification firms and foreclosure rescue scams, beware!
Finally the government is attempting to put an end to foreclosure rescue scam artists once and for all.
The Federal Trade Commission (FTC) stated on Thursday that they are to purpose to ban any loan modification firm from collecting an up front fee from troubling homeowners. However, they say these companies are only allowed to collect a fee if they are successful in providing help to the borrower.
“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.”
Government officials and most of the struggling homeowners on main street are well aware that many of these companies charge an upfront fee anywhere from $1,000 to $3,000 for their services.
After tidal waves of complaints by homeowners saying they got ripped off by these firms, and 28 cases filed against loan modification companies by the FTC, the government is now looking to put an end to these companies charging an up front fee and often show no results, or is just a scam all together. Federal and state law enforcement has already cracked down on thousands of these companies. Typically, these companies are being charged for not providing the service they have promised to offer, and many times they are misleading homeowners by stating they are affiliated with the government’s Home Affordable Modification Program (HAMP), or Making Home Affordable (MHA), when this is not the case.
“Far too many homeowners have paid up-front fees to bad actors who promised loan modifications but never delivered,” Treasury Secretary Timothy Geithner said. “I commend the FTC for proposing a strong set of safeguards to protect consumers from these predatory practices.”
The new rule that the FTC is purposing will make sure that these companies do not tell their clients to stop communication with their lender and/or mortgage servicer, and to stop them from misleading their clients about the facts of this painstaking process.
The FTC also attempts to stop other practices that commonly take place including:
-Whether or not the borrower will be approved for a loan modification and how long the process is going to take. We all know that this process can easily take up to a year and there is never a guarantee the homeowner will be approved for assistance.
-Stop companies from telling their clients they are affiliated with private or public entities in order to obtain more business. Many of these firms make it sound like they are affiliated with government programs or other events of that nature.
-Stop advising their clients on mortgage obligations. Many of these companies will tell their clients to stop making monthly mortgage payments in order to get the lenders attention. This has caused thousands of people to default and foreclose on their home.
Many officials and consumer advocates are advising homeowners to work with non-profit organizations that will charge no fee for their services.
FTC press release: http://www.ftc.gov/opa/2010/02/mars.shtm
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