Bankruptcy

Protection from Mortgage Relief Scams from the FTC

By guest-writer

The Federal Trade Commission announced this week that it has published new rules for companies that advertise themselves as mortgage foreclosure relief outfits. The rules, it seems, are designed to eliminate scammers from taking money from struggling homeowners.

Here?s a look at the details.

FTC: No Advance Fees, More Disclosures

The FTC?s rules include a number of provisions designed to bring more transparency to the world of foreclosure relief companies. These include:

• A ban on upfront fees: This rule will prevent companies from taking homeowners? money without actually offering any help. When the new rules take effect on December 13, foreclosure relief firms will be required to present consumers with a written agreement from the lender or servicer indicating that the proposed changes are acceptable and approved, as well as a written document detailing the changes.
• Increased disclosures: In addition to the ban on advance fees, the new rules will require foreclosure rescuers to disclose more information and in a clearer format. Specifically, firms must explain that they are not affiliated with the government, that a customer?s lender might not agree to the proposed mortgage modification and that if a customer stops making regular mortgage payments it could adversely affect her credit rating and/or cause her to lose her home. Further, these companies have to disclose that customers have the right to stop doing business with the firms whenever they choose and that they have the right to reject an offer made by these firms.
• Prohibited claims: Besides being required to disclose certain information, foreclosure rescue firms will be forbidden from making any kinds of false or misleading claims, which might include claims about their likelihood of helping a client, government affiliation, a client?s obligation to pay, refund and cancellation policies and how much the company?s services cost.
• Attorney exemption: It should be noted that the FTC rules provide an exemption for lawyers who are properly licensed and actively practicing law in the state where the client or the client?s home is located.

More Hope for Struggling Homeowners?

The new rules come as welcome news to a nation gripped by a flailing housing market, where millions of citizens are in some phase of the foreclosure process. Hopefully, when the new rules take effect, they?ll decrease the prevalence of foreclosure rescue scams, which would in turn mean that American families would stand a better chance of finding workable solutions to keeping and staying in their homes.

It should be noted that these rules are in a similar vein to those passed earlier this year for the debt settlement industry, which, like the foreclosure rescue industry, has historically been plagued by fraudsters and scammers who wreak financial havoc on cash-strapped customers.

Full post as published by The Bankruptcy Blog on November 22, 2010 (boomark / email).