Homeowners desperate to dig themselves out from crippling monthly mortgage payments are now protected by a new Federal Trade Commission rule banning mortgage-relief companies from charging fees in advance.
The advance-fee ban, which was first announced last November as part of the FTC's Mortgage Assistance Relief Services (MARS) Rule, is designed to protect struggling homeowners from predation by the countless mortgage relief scams that have proliferated in recent years."Banning the collection of up-front fees will protect homeowners from being victimized," FTC Chairman Jon Leibowitz said in a statement. "This is especially important at a time when so many people are behind on their mortgages or facing foreclosure."
During the ongoing mortgage crisis, mortgage-relief scammers have fooled consumers into paying advance fees for them to negotiate with their lenders to obtain a loan modification, a short sale or other relief from foreclosure. Many of these bogus operators, the FTC says, typically claim to a be affiliated with the government and/or government housing-assistance programs in order to hoodwink victims.
Under the advance fee ban, which went into effect on Jan. 31, mortgage relief companies are forbidden from collecting fees until they provide customers with an acceptable written offer from their lender or servicer.
Mortgage-relief firms must also provide customers with documentation from the lender or servicer detailing the changes to their monthly mortgage payments. The companies are also required to remind consumers of their right to reject the mortgage-relief offer without any obligation.
As Consumer Ally has previously reported, the FTC has brought more than 30 cases against these scams, while state and federal law enforcement officials have prosecuted hundreds more.
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Feds Ban Upfront Fees by Mortgage-Relief Firms