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Advance Fees Banned for Mortgage Relief Companies

As troubled homeowners continue to face foreclosures through the mortgage crisis, shady mortgage relief companies have sprung up to “help” unsuspecting consumers - while charging advance fees without providing the services promised.

But mortgage relief companies are no longer allowed to charge homeowners up-front fees, thanks to the Federal Trade Commission’s new Mortgage Assistance Relief Services (MARS) Rule.

“Banning the collection of up-front fees will protect homeowners from being victimized,” FTC Chairman Jon Leibowitz said. “This is especially important at a time when so many people are behind on their mortgages or facing foreclosure.”

Since January 31, 2011, companies that offer mortgage modification services or sell other types of mortgage relief services have been forbidden from collecting a fee until the homeowner has signed a written agreement with the lender that includes the relief obtained by the company.

The mortgage relief company must also provide a the homeowner with a written statement from the lender showing how the relief will change the terms of the homeowner’s mortgage, including any limitations on a trial loan modification.

Upon presenting the new loan terms to the homeowner, the mortgage relief company must also inform the homeowner, in writing, that the homeowner has the right to reject the offer without obligation, or if they accept, the total fee due.

The MARS rule applies specifically to mortgage relief companies, but attorneys are generally exempt from the rule “if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule,” according to the FTC.

To be exempt from the advance-fee ban, attorneys must also put any advance fees received in a client trust account and follow state laws and regulation for those types of accounts.

The FTC reports that they have filed 32 lawsuits against mortgage assistance relief companies for deception and abuse over the past three years, and that state law enforcers have filed hundreds of additional cases.

The FTC is the nation’s consumer protection agency against fraudulent, deceptive, and abusive business practices.

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Wednesday, 23 September 2020

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