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Short Sales and Loan Modification -FTC says no advanced fees

By
Real Estate Agent with McConnin & Company Realty

Three take aways

1.  Unless you are an attorney, no advance fees for upside down home owners

2. Watch out before you tell someone not to speak with the bank

3. Be very careful about claim you will be able to stop a foreclosure.


Short Sale Attorney

" From the FTC website

 

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.

Disclosures

The Rule requires mortgage relief companies to disclose key information to consumers to protect them from being misled and to help them make better informed purchasing decisions. In their advertising and in communications directed at individual consumers (such as telemarketing calls), the 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;
  • the lender may not agree to change the consumer’s loan; and
  • if companies tell consumers to stop paying their mortgage, they must also tell them that they could lose their home and damage their credit rating.

Companies also must explain in their communications to consumers that they can stop doing business with the company at any time, can accept or reject any offer the company obtains from the lender or servicer, and, if they reject the offer, they don’t have to pay the company’s fee. The companies also must disclose the amount of the fee.

Prohibited claims

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

  • the likelihood of consumers getting the results they seek;
  • the company’s affiliation with government or private entities;
  • the consumer’s payment and other mortgage obligations;
  • the company’s refund and cancellation policies;
  • whether the company has performed the services it promised;
  • whether the company will provide legal representation to consumers;
  • the availability or cost of any alternative to for-profit mortgage assistance relief services;
  • the amount of money a consumer will save by using their services; or
  • the cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide."

Tni LeBlanc, Realtor®, J.D.
Mint Properties, Lic. #01871795 - Santa Maria, CA
Tenacious Tni (805) 878-9879

Sounds like they went pretty far with these rules.  From what I've read if you are not successful at getting a loan mod then you can't charge for the work you've done.  That seems to go too far.

I suppose there are way too many outfits taking advantage but these rules may make it hard for consumers to find an honest person who will be willing to help them too.

Thanks for the info John!

Jan 28, 2011 03:58 PM
Anonymous
John McConnin

Hello Tni - 

For a while it was the wild west, but I think the federal govt and CA Down are cracking down on abuses.

 

 

 

 

Jan 31, 2011 10:47 AM
#2
Tony and Suzanne Marriott, Associate Brokers
Serving the Greater Phoenix and Scottsdale Metropolitan Area - Scottsdale, AZ
Coldwell Banker Realty

 

From the info recently published by the Arizona Department of Real Estate MARS will impact those that are "negotiators" only far more than listing agents who negotiate for their Seller clients.  Here is the link to the ADRE info:

http://www.azre.gov/PublicInfo/Documents/Short_Sale_Negotiator_Regulations.pdf

Also - agents claiming to have closed "hundreds" with astoundingly high list to close ratios need to make sure their claims match the data in the MLS.

 

Feb 06, 2011 03:40 AM