No more upfront fees for mortgage relief

Friday, February 18, 2011

Companies that offer to help homeowners modify their mortgage or provide some type of foreclosure relief are now banned from charging advanced fees before a deal is reached.

According to the Federal Trade Commission (FTC), mortgage assistance relief companies may not collect a fee until the consumer has accepted an agreement from a lender, and explains exactly what the relief is.

The mortgage relief company must explain, in writing, that the homeowner may reject any lender's offer without having to pay a fee. The cost of the relief company’s services must also be disclosed.

If an agreement is reached, any changes to the mortgage - including any limitations on a trial loan modification - must also be in writing.

The advanced fee ban is part of the FTC ‘s new Mortgage Assistance Relief Services (MARS) rule that took effect January 31, 2011. The FTC issued the ban to protect homeowners from bogus claims by mortgage relief companies.

Mortgage relief companies are also banned from

• telling homeowners to stop communicating with their lender • making misleading claims about the success of their results • making false claims about refunds or cancellations

The companies must warn consumers that if they stop paying their mortgage they could lose their homes and destroy their credit rating.

The MARS mortgage relief rule applies to for-profit mortgage relief companies. It does not include banks, credit unions, insurance companies and attorneys. However, there is no fee for mortgage modifications made through non-profit housing counselors, mortgage servicers, or lenders.

For more about the FTC’s mortgage relief rule click mortgage relief fees