Rules Concerning Loan Modification

Rules Concerning Loan Modification Companies Have Changed

New Law Aimed at Stopping Loan Modification Fraud Has Mixed Effect.

A rule by the Federal Trade Commission came into effect February 1 that may have a huge impact on for-profit loan modification businesses.  The rule, known as the Mortgage Assistance Relief Services or “MARS,”  affects for-profit companies that, in exchange for a fee, offer to work on behalf of consumers to help them obtain modifications to the terms of mortgage loans or to avoid foreclosure on those loans.  The Final Rule will, among other things, will: prohibit providers of such mortgage assistance relief services from making false or misleading claims; mandate that providers disclose information about their services; and, most significantly, bar the collection of advance fees for these services.  Those who violate the rule are subject to civil action by the FTC or appropriate state agency.What this means is that loan modification companies will in effect have to take cases on contingency.  They will have to wait to collect their fee until after the loan is modified.  It is doubtful that a client who was not successful in having their loan modified will pay the fee after the fact.  This bill thus potentially marks the end of that business, with one exception: attorneys who are representing a client in bankruptcy may still obtain advance fees.The rule was ostensibly promulgated to stop abuse in the loan modification field.  There have been many instances of modification companies demanding their entire fee prior to providing any services.  That practice led to abuses, such as failing to deliver on the promised modification while keeping their unearned fee.  However, it will also have the effect of eliminating many legitimate agencies whose work has been invaluable to consumers attempting to get banks to modify their loans.  That fact has led many observers to suggest that it is the banks that pushed this rule through in order to prevent consumers from receiving assistance in navigating the myriad hurdles that they often face when attempting to deal with their lenders.At the same time, there are many unscrupulous lawyers and modification companies that have ripped off many people.  We here at Smith & Rosenberg, PLLC have recovered tens of thousands of dollars for clients who were taken by such companies.  We note that there seem to be many companies from California that prey on Washington residents.  They often have an attorney associated with them, a website, and “800” numbers, all of which suggest that they are legitimate.  However, many times they are not.In fact, the Chief Trial Counsel of the California State Bar has made it a priority to address these scam companies.  Complaints to the California Bar have almost doubled in the past year, and this is typical of Washington State as well.  There is also an opinion within the loan modification community that the new law will not affect them here in Washington as the Department of Financial Institutions does not have the resources or interest to do anything about them.  We will have to wait and see, but if their past record is any indication, those commentators may be right.If you have paid an attorney or a modification company to modify your loan and have not received any services in return, we can help you.  If the company is from out of state, the Washington State Bar and the Attorney General’s Office of Consumer Complaints do not appear terribly interested in pursuing the matter.  They refer complaints to the Department of Financial Institutions.However, DFI has no money to pursue those complaints and little apparent interest in going after out-of-state scammers.  Rosenberg Law Group, PLLC are very interested in seeing you get justice.  We have a proven track record of obtaining the return of our client’s money.  We take these cases on contingency, which means that you only pay us a fraction of the money that we recover and only if we recover money.  Please give us a call at (206) 407-3300 or email us at info@rosenberglawgroup.net if you would like to discuss your situation and see what we can do to get your money back.

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