The Federal Trade Commission has proposed some new rules directed at businesses referred to as Mortgage Relief companies. These companies offer to help consumers who are close to foreclosure. They promote assistance with mortgage modification which implies it is a government program.
The company first requires a fee be paid before any assistance is given. In many cases the fee is paid and the consumer gets nothing in return. It is a fraud and a scam that preys on desperate people and the Federal Trade Commission (FTC) wants them to stop. This is yet another scam that has been developed by taking advantage of current market conditions.
The FTC has proposed that mortgage relief companies be barred from charging upfront fees. The government agency wants these businesses to only be allowed to charge a fee after services have been provided. This would put a serious crimp in their ability to operate their frauds.
The condition of the economy has made ripe conditions for scammers and frauds. High unemployment and falling house prices have led to millions of consumers being threatened with the loss of their homes. The fact that consumers working directly with mortgage companies have been largely unsuccessful in getting their mortgages modified has made using an intermediary look beneficial. The mortgage relief company promises help to consumers stuck in a mire of paperwork or unable to even get the mortgage company to work with them.
The market conditions have led to a whole industry that promises consumers assistance with mortgage modifications and relief from foreclosure. Many of these companies simply take the fees paid and never provide any help to the consumer. The FTC has already brought 28 cases against mortgage relief companies for misrepresentation.
The misrepresentation involves implying the mortgage relief company works with the government and the modification programs such as the Making Home Affordable Program. They do not. In reality, it is con artists convincing consumers to give them fees for services they will never receive. It is a predatory practice. The mortgage relief company tells consumers to stop contacting their mortgage company so they don’t find out until it’s too late that they have been scammed.
The new rules would require the mortgage relief companies to reveal they are a for-profit business and what their true affiliations are with the mortgage companies and government agencies. The mortgage relief companies would also have to tell the consumer the full amount that will have to be paid and that there are no guarantees their mortgages will be modified. There are many other requirements also, and they are all designed to force the mortgage relief company to tell the truth about what it is offering.
The new rules can only apply to businesses that fall within the FTC’s jurisdiction. That largely encompasses all private businesses except for banks, thrifts, and federal credit unions. But these businesses are regulated by federal banking commissions and the Federal Reserve so there are still controls over fraudulent practices.
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