FTC Proposes Up-Front Fee Ban for Mortgage Modifications

The Federal Trade Commission has proposed a new rule that would ban third party mortgage companies from charging up-front fees for mortgage modification and foreclosure rescue.  Under the new FTC rule, third party mortgage companies would only receive payment after services are completed for the borrower.  These companies would also be required to disclose the total amount for the services requested.

Once the company has revealed this up-front information, they are also required to inform borrowers that any bank they are currently working through may not agree to any proposed changes to their loan.  These rules will force third party mortgage companies to work with borrowers in a much more constructive and productive way.  The disclosures required of these companies to date are lacking in fairness to the consumer.

Most often third party mortgage companies create road blocks for the borrower during a time in which the borrower is seeking mortgage relief and may need financial guidance but instead receives little assistance from the company.  They are then left with more debt caused from up-front fees and undisclosed charges.  For this reason, the proposed FTC rule will prohibit these companies from telling consumers to end communication with their lenders,  force them to disclose the true results and duration of the mortgage relief process and also disclose any refund or cancellation policies currently being used by their company.

In a press release statement FTC Chairman, Jon Leibowitz, says, “Homeowners facing foreclosure or struggling to make mortgage payments shouldn’t have to contend with fraudulent ‘companies’ that don’t provide what they promise, adding, the proposed rule would outlaw up-front fees so companies can’t take the money and run”.

Several states now have similar laws in place, forbidding any upfront fees. Governor  Schwarzenegger, (R-Ca.) signed Senate Bill 94 in October 2009, which banned the up-front fees.  More and more states are following this trend.  The FTC rule will create a more cohesive criteria for the nation, giving each state the same rules as the next.

Related posts:

1. Mortgage Delinquencies Continue to Increase
2. Strategic Mortgage Defaults A Cause For Concern
3. Permanent Loan Modifications Difficult To Achieve
4. Operation Stolen Hope Strikes a Blow
5. Qualifying For The New Foreclosure Relief Program

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