FTC Targets Mortgage Modification Scams

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A new rule by the FTC will protect homeowners facing foreclosure. The rule will prevent companies and individuals from charging and collecting upfront fees. No fees will be paid until the homeowner accepts a written loan modification offer from a lender. Furthermore the homeowner must be told that they can accept or reject the lender's offer. If the offer is rejected the homeowner does not have to pay the modification company a fee.

The housing crisis opened the flood gates for criminals to prey on desperate homeowners. These companies promised to modify the loans for millions of homeowners. However, the reality is that nothing was done to help the borrowers. Homeowners were asked to pay thousands of dollars upfront. They then sat around and waited, and waited. In many cases when they asked for a refund the companies were long gone. they simply moved to another city and opened shop.

The Federal Trade Commission, state and federal law enforcement agencies have brought thousands of charges against foreclosure relief companies.

The concern I have is the penalties for companies and individuals if they are found guilty. If these criminals simply have to return the money, then this law isn't worth the paper it's written on. They have to be banned from the industry. In addition, they should be fined 10 times the amount taken from homeowners. And the homeowners should receive a refund double what they paid upfront.


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