Mortgage Rescue Companies cannot Charge Advance Fees to Prevent Foreclosures- By: Dywon Erick Dylon
Most people who are in danger of foreclosures and have failed to benefit from the government program for loan modification may be drawn to take the aid of mortgage rescue companies.
Such companies try to exploit the fact that you are in a desperate condition and so will not mind paying hefty fees. Very often, you end up being cheated as these companies take the money and disappear. Because of this sad situation, the federal government has moved in to protect the rights of borrowers.
From January 1st, 2011, companies that are responsible for foreclosure relief will be banned from collecting payment before providing services. They cannot charge for their services unless they present a written acceptance letter from the lender. This ensures that the foreclosure relief company makes significant efforts on its part to help you before they charge you a fee. However, non-profit agencies are exempt from this rule.
A few states have already banned collection of fees in advance. Pennsylvania has a rule that prohibits advance fees unless a broker who is licensed gets a penal bond for getting advance fees. But very few brokers follow this procedure. In spite of the protection provided in Pennsylvania, many borrowers have lost money by paying so called mortgage rescue companies and were not provided services.
According to the Federal Trade Commission, they are prohibiting advance fees because many affected by the crisis of foreclosures are exposed to the wiles of fraudulent agencies. Because there seems no end in the foreclosures crisis, many fraudulent agencies have found the time ripe for exploiting homeowners and have spent a lot of advertisement in the media to highlight their services.
Some experts called these relief companies as the worst manipulators in the crisis of foreclosures. They said that some homeowners who fall victim to such fraudulent companies often miss the opportunity to benefit from authentic foreclosure relief programs provided by government agencies like the HUD (Department of Housing and Urban Development) and other non-profits.
However, one of the reasons why homeowners fall prey to frauds is because the federal programs like HAMP (Home Affordable Modification Program) have not benefited many people as targeted. Lenders were expected to ease mortgage payments to help homeowners retain their homes and fight foreclosures.
According to the Obama administration, the program was intended to help around 4 million property owners by end of 2010. However, till October 2010, permanent modifications have been granted only to 483,342 applicants, and the trial modifications number was four times the number of active trials that have escaped foreclosures.
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