WASHINGTON, D.C. — Consumers Union, the nonprofit publisher of Consumer Reports magazine, today applauded the Federal Trade Commission (FTC) for a new rule to protect homeowners from mortgage-relief scams.
Ioana Rusu, regulatory counsel for Consumers Union, said, “This new rule cracks down on companies that rip off homeowners who are struggling to pay their mortgages. There are plenty of companies out there making big promises of helping homeowners, but too often, they just take your money without helping you at all. This rule sends a clear message that these kinds of scams aren’t going to be tolerated.”
Mortgage-relief lenders often promise to help homeowners get a loan modification in exchange for a hefty advance fee. They may claim to have specialized knowledge of the mortgage lending industry, and tout the fact that they work with licensed attorneys to bolster their claims. In many cases, however, little or no work is done to save the homeowner from foreclosure, and homeowners often receive misinformation that actually decreases their chances of getting a modification, such as the admonition not to communicate with the lender. In the end, many consumers end up losing both their homes and the advance fees they paid.
Under the new FTC rule, these companies are banned from charging advance fees before they provide the borrower a written offer from their lender that the consumer decides is acceptable, plus a description of the key changes to the mortgage that would result if the consumer accepts the offer. The rule also says these companies must disclose that they are not associated with the government, and their services have not been approved by the government or the consumer’s lender.
Contact: David Butler, (202) 462-6262