New Proposals to Protect Homeowners

The federal government is proposing new steps to try to protect people who may be struggling with their mortgage payments.

According to a recent announcement from the Federal Trade Commission, it has proposed a rule that would prohibit companies from charging up-front fees for mortgage modification services. Under the proposal, companies would only be able to collect their fees after having provided such services, and they would be barred from telling consumers to stop paying their bills or communicating with their creditors.

“The proposed rule would outlaw up-front fees so companies can’t take the money and run,” said FTC Chairman Jon Leibowitz.

Regardless of whether this rule becomes a reality, homeowners and credit card customers have long been warned to be extremely wary of any company that requires an up-front payment for loan modification or debt management services. People who patronize such companies often end up with severe damage to their credit scores or in worse financial shape than when they started, especially if they are instructed to stop paying their monthly bills or simply never get the services promised.

The FTC also noted that it has already brought 28 lawsuits against companies that fail to deliver on the mortgage modification services they promise or misrepresent themselves as being affiliated with government programs.