March 26, 2010
Federal Trade Commission
Office of the Secretary, Room H-135 (Annex W)
600 Pennsylvania Avenue, NW
Washington DC 20580
Via Electronic Submission
Re: Mortgage Assistance Relief Services – Proposed Rulemaking; Rule No. R911003
Dear Sir/Madame:
Consumers Union, the nonprofit publisher of Consumer Reports, appreciates this
opportunity to comment on the Federal Trade Commission’s (FTC) Notice of Proposed
Rulemaking (NPRM) regarding mortgage assistance relief services.
I. Summary & General Comments
Consumers Union supports the FTC’s proposed Rule regulating for-profit companies
that, in exchange for a fee, offer to work with lenders and servicers on a homeowner’s
behalf to modify the terms of mortgage loans or to avoid foreclosure on those loans.
With some enhancements, the proposed rules prohibiting advance fees, barring false or
misleading claims, and requiring certain disclosures regarding loan modification services
taken together will help to protect consumers from the deceptive and abusive practices
that have been so pervasive in the mortgage assistance relief services (MARS) industry.
Consumers Union also supports the Rule’s extension of liability to those who provide
substantial assistance to an entity engaged in a violation of these Rules, as well as the
recordkeeping, reporting and compliance requirements imposed.
Currently, MARS providers are offering consumers negotiation services and assistance
for obtaining loan modifications, short sales and other forms of foreclosure avoidance
relief. Although consumers may have invested thousands of dollars in order to receive
these services, too often their expectations are not being met. As a result, many
consumers are receiving little or no benefit in return, and in some cases are worse off
than if they hadn’t engaged the services of for-profit MARS providers.
The proposed Rule would benefit consumers and improve the MARS marketplace by
more carefully regulating the market and provision of MARS services to consumers. It
will have the desirable effect of eliminating those MARS companies that obtain business
by luring and misleading desperate consumers rather than by providing quality services.
The need to regulate this industry is urgent and great. With record numbers of
homeowners facing foreclosure, the market opportunities for for-profit MARS providers is
enormous.” This reality has lead to an explosion in the for-profit MARS industry and a
corresponding rise in abuses against consumers by members of this industry. This is
indicated by the fact that the National Association of Attorneys General (representing
Attorneys General from 37 states has urged the FTC to implement strong rules
protecting consumers in this area. Consistent with this approach, in California, (the state
with the highest number of foreclosure filings in the nation in 2009), the Attorney General
has engaged in high profile action against unscrupulous MARS providers accused of
abusing consumers.” Additionally, many homeowners have reported to Consumers
Union that they have been aggressively solicited by MARS providers who lured them
into contracting for their pricey services by making promises that have not been
delivered. In some cases consumers report being worse off after paying thousands of
dollars to for profit MARS providers who did not help them. The pervasiveness of MARS
entities leading consumers down this path and the vulnerability of borrowers desperate
for relief compel the need for the implementation of strong Rules regulating the actions
of this industry.
Though not covered by the NPRM, Consumers Union recommends that the FTC prohibit
MARS providers from advising clients who are not yet in default to cease making
payments on their loans in order to receive a loan modification. Consumers Union also
supports the inclusion of a right to rescission in the Rule and urges the FTC to not create
an exemption for attorneys from requesting or receiving advance fees for MARS
services. Taken together, the proposed Rule and the additional protections we propose
will be effective to help to reduce the widespread abuse in the MARS industry and allow
consumers to make informed choices when seeking a mortgage loan modification or
other form of foreclosure avoidance assistance from a for-profit entity.
For the complete comments, click here (PDF format).