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Several consumers in Western Virginia have been contacted by loan modification companies offering services in direct violation of Federal Trade Commission regulations, according to an alert from the Better Business Bureau.
While there are many reputable mortgage relief companies, these particular companies have requested advance fees and have violated several FTC rules.
A Roanoke resident told the BBB they sent $2,000 in fees to an out-of-state loan modification company in order to lower interest rates, but has since seen no results. “This is one of several calls from consumers who have lost up to thousands of dollars in loan modification scams,” the BBB says.
Phony loan modification companies often call vulnerable foreclosure victims and homeowners with offers to lower mortgage interest rates. “These companies charge hefty fees that can be in the thousands of dollars. Victims say that after the fees have been paid, the scammers fail to perform. These companies may also claim to be government agencies,” BBB says.
As of Jan. 31, 2011, the FTC’s Mortgage Assistance Relief Services (MARS) Rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable. The company must also give the homeowner a document showing changes to the loan if it is accepted.
In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers.
Consumers need to be on the lookout for loan modification scams that appear to take on one of the following forms:
• Lenders are charging upfront fees for loan modification negotiations to be performed in violation of the MARS rule.
• Companies disguise themselves as government agencies. In some cases, they even purport to be the Better Business Bureau.
• Consumers are told to stop making home loan payments to their lenders and to pay the loan modification company instead.
• Homeowners are told to transfer their deeds into the names of the loan modification company.
“We want to keep our consumers safe from these predatory practices,” says Julie Wheeler, CEO and president of the BBB serving Western Virginia. “Make sure you use a licensed company when negotiating any modification of your mortgage, and check out the company’s BBB Business Review before accepting any offers.”
Consumers who need help with their mortgage should consider the following tips:
Talk to your lender
Before paying an outside company to negotiate with your mortgage provider, try to get some relief yourself for free. Many companies will work with a consumer to avoid foreclosure.
Check out the company’s BBB Business Review at bbb.org to see its BBB rating, complaint history and more.
Use a licensed company
Any business offering loan modification services must be licensed. Search the agent or company name in the National Mortgage Licensing System at mortgage.nationwidelicensingsystem.org to ensure you are not dealing with a scammer.
Know where to turn
If you feel your mortgage provider is treating you unfairly, FTC also recommends consumers call 1-888-995-HOPE to get free personalized advice from housing counseling agencies certified by the U.S. Department of Housing and Urban Development.