FTC May Ban Upfront Payments for Loan Modifications

September 17, 2009 No Comments »

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The head of the FTC is considering a nationwide ban of upfront payments to companies that advertise help to borrowers behind on their mortgages, according to the AP.

FTC Chairman Jon Leibowitz said scammers often charge $1,000 to $3,000 in upfront fees in exchange for assistance that rarely pays off, or accomplishes nothing beneficial at all.

“Today’s challenging economy presents an opportunity for con artists who prey upon financially distressed consumers. The Federal Trade Commission and our state and federal partners will continue to bring law enforcement actions to stop this insidious fraud,” said Leibowitz, in a release.

“If you’re worried about keeping your home, avoid any company that asks for a large fee in advance, guarantees that they’ll stop a foreclosure or modify a loan, or tells you to stop paying your mortgage company and to pay them instead.”

Upfront fees are already banned in 20 states; 12 state AGs met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner, and HUD Secretary Shaun Donovan today to discuss anti-fraud operations.

The FTC also announced two new law enforcement actions against foreclosure rescue and loan modification companies, including “Nations Housing Modification Center” and “Infinity Group Services.”

Both offered assistance in exchange for an upfront fee; the Commission has filed 22 of these cases since the housing crisis began, a number that seems low considering the related carnage.

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