-Staff Writer-

WASHINGTON, D.C. (FinalCall.com) – Everyone is familiar with the lures that have suckered too many frustrated and naive homeowners into paying a fee for help in saving their home.

“Stop Foreclosure Now!”, “We guarantee to stop your foreclosure.”, “Keep Your Home. We know your home is scheduled to be sold. No Problem!”, “We Can Save Your Home. Guaranteed. Free Consultation” are all familiar refrains from flyers, posters and television commercials.

The Federal Trade Commission put a halt to that Nov. 18, with a new rule that 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.


“At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results,” FTC Chairman Jon Leibowitz said.

“By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”

The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis.

Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs.

The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more.

“I commend the Federal Trade Commission (FTC) for taking action to protect struggling homeowners from loan modification and foreclosure rescue scammers through the issuance of its final Mortgage Assistance Relief Services (MARS) rule. Throughout America, homeowners continue to struggle with making their monthly mortgage payments,” said Rep. Maxine Waters (D-Calif.)

“Yet sadly, foreclosure rescue and loan modification scammers are preying on these homeowners, deceiving them into paying thousands of dollars upfront for little or no services. The MARS rule will prohibit foreclosure rescue and loan modification services from collecting fees upfront unless the homeowner receives a written loan modification offer from the lender or servicer that they decide to accept.”

The growing foreclosure mess, which has lost 2.5 million homes, has also rendered wary homeowners as prey.

“Today’s rule comes as a victory at the end of a long battle by both federal regulators and Congress to expose these predatory actors and take action to protect homeowners. Last year, I held a hearing in my Subcommittee to look at the emerging issue of foreclosure rescue fraud,” wrote Rep. Waters in a prepared statement.

“As a result of that hearing and my work with defrauded homeowners, I included provisions in the Dodd-Frank Wall Street Reform and Consumer Protection Act to give the Consumer Financial Protection Bureau jurisdiction over these scammers and to prohibit lawyers from engaging in deceptive foreclosure fraud rescue scams. This rule will provide much needed protections for homeowners until the CFPB is created. Protecting struggling homeowners has long been a priority for me and I look forward to continuing to work with the FTC and the CFPB to keep American homeowners safe from predatory actors in the real estate market.”

While the FTC rules should help some homeowners, they aren’t as strong as some state’s rules. In Maryland if a “foreclosure rescue specialist” goes so far as to sell a distressed property within 18 months after acquisition then 82 percent of any profit must be paid back to the original owner. Illinois and Minnesota have similar regulations.

The Maryland law sets out a number of requirements when a “rescue specialist” offers to buy a home from someone facing foreclosure:

– A foreclosure consultant may not demand payment until after having performed all the services promised under the contract.

– A foreclosure buyer may not offer to re-sell the property back to the original homeowner unless the purchaser verifies that the homeowner has the ability to afford a re-purchase.

– The consultant may not accept a power of attorney from the homeowner for any purpose except to inspect documents.

The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.

The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about: the likelihood of consumers getting the results they seek; the company’s affiliation with government or private entities; the consumer’s payment and other mortgage obligations;

All provisions of the rule except the advance-fee ban will become effective December 29, 2010. The advance-fee ban provisions will become effective January 31, 2011.