A tipster (send in your tips here) brought an article from las Vegas to my attention. in the article, “FTC banning up-front loan mortgage modification fees,” Ian Hirsch of Fortress Credit Services, which offers loan modification services, is quoted as saying “It was a terrible decision by the FTC,” that upfront loan modification fees were banned.
Hirsch said the rules were adopted at banks’ insistence. Banks don’t want advocates representing homeowners who are struggling to avoid foreclosure through modification of interest rates and monthly payment amounts of principal reduction, he said.
“It’s intended to kill an industry,” Hirsch said. “It was overreaching and certainly not in the consumer’s best interest.”
Maybe from Hirsch’s point of view as a loan modification company that might be true but it bears no representation to the reality that many consumers have faced after paying loan modification firms thousands only to receive little to no real help. Consumers were getting screwed by mortgage modification companies taking money but not really helping. I’ve reported on many of these companies.
The article sums up the reality I see in it’s statement:
“By banning providers of these services from collecting fees until the customer is satisfied with results, this rule will protect consumers from being victimized by these scams,” commission Chairman Jon Leibowitz said in a statement.
But there is more on this from the FTC. Here is the statement in context.
FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams
“Homeowners will be protected by a new Federal Trade Commission rule that bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable.
“At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results,” FTC Chairman Jon Leibowitz said. “By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”
The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis. Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more.
Advance fee ban
The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.” – Source
You’ll notice the FTC enacted this ruling after the numerous complaints from consumers and not after being manipulated by banks.