FTC Rule Protects Homeowners from Mortgage Relief Scams

The Federal Trade Commission recently issued the Mortgage Assistance Relief Services Rule to protect homeowners from mortgage relief scams.  When the real estate market started to flounder, a number of fly-by-night operations claiming expertise in loan modifications and short sales sprung up.  As a result, homeowners — many of whom were already struggling to stay on top of their mounting bills — paid sums to such companies in an attempt to obtain mortgage relief or short sale assistance, to no avail. 

In an attempt to protect homeowners, effective January 31, 2011, the FTC banned mortgage relief companies from collecting any fees from homeowners until a loan modificaton or short sale is in fact completed.  For mortgage relief to be “complete”, the lender must present a written offer which the homeowner accepts.  Mortgage relief companies must remind homeowners that they have an option to reject any offer which they receive, without incurring fees from the mortgage relief company.

Mortgage relief companies should also disclose whether or not they are affiliated with any goverment agency; currenty many companies prepare marketing material which falsely implies that they are a government affiliate, causing unsuspecting homeowners to hire them.  Mortgage relief companies must also clearly state that there is no guarantee that homeowners will in fact receive any mortgage relief.  Additionally, all fees must be disclosed in advance. 

Homeowners should be wary of mortgage relief companies.  Prior to hiring a company, investigate them thoroughly!