Educational Consumer Tips

Real Estate Loan Modification

Author: Better Business Bureau
Category: Finance

A Federal Trade Commission rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. The Mortgage Assistance Relief Services (MARS) Rule protects distressed homeowners from mortgage relief scams. Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government or housing assistance programs.

Beginning December 29, 2010, the new disclosure rules require mortgage relief companies to disclose key information to consumers to protect them from being misled and help them make better informed decisions. In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Effective January 31, 2011, the most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.  For more information on the new rule, visit the FTC.