- The Washington Times - Friday, September 18, 2009

The Federal Trade Commission announced Thursday that it may ban upfront payments to companies that advertise help for borrowers struggling to pay their home loans.

Federal regulators say illegal and predatory practices in the mortgage market are rampant in the wake of the recent financial crisis. Scammers, they say, routinely prey on mortgage holders in danger of default by charging them upfront fees of $1,000 to $3,000 for help in modifying the terms of their loans — a promise rarely, if ever, kept.

“Today’s challenging economy presents an opportunity for con artists who prey upon financially distressed consumers,” said Federal Trade Commission (FTC) Chairman Jon Leibowitz. “If you’re worried about keeping your home, avoid any company that asks for a large fee in advance.”

The chairman didn’t provide a timetable for deciding whether to ban “loan counselors” in comments in which he also said his agency was considering restrictions on how mortgage rescue companies can advertise their services. Federal regulators say many scammers run fraudulent television advertisements on “prominent networks” promising simple solutions to complex financial problems.

Mr. Leibowitz’s comments follow an Obama administration announcement in April of a multiagency crackdown on foreclosure rescue scams and loan modification fraud designed to protect homeowners from predatory financial practices.

As part of the ongoing fraud investigation, the FTC said Thursday that it filed civil charges against two California companies — Nations Housing Modification Center and Infinity Group Services — accused of charging homeowners large fees for assistance in working with their lenders but doing “little or nothing” to actually help them.

The agency also filed charges against New Jersey-based United Credit Adjusters Inc., accusing the company of running a loan modification scheme under the name Loss Mitigation Services Inc.

The FTC’s announcement coincided with a meeting in Washington of federal and state officials regarding emerging trends and ongoing efforts against fraud in the mortgage marketplace. Attendees included Mr. Leibowitz, Treasury Secretary Timothy F. Geithner, Attorney General Eric H. Holder Jr., Housing and Urban Development Secretary Shaun Donovan, and more than 10 state attorneys general.

“A clear lesson of this financial crisis is that American consumers need better protection against fraud,” Mr. Geithner said. “And while we will prosecute anyone who violated the law, going forward we will not wait for problems to peak before we respond.”

Mr. Holder added that efforts to root out mortgage fraud “must be, and are, concerted and coordinated.”

“Working together, we can send a clear and straightforward message: Those who prey on vulnerable American homeowners cannot hide from the hand of the law,” Mr. Holder said.

Authorities emphasized that help is available for free from government-approved housing counselors. Homeowners can locate free housing counselors at www.makinghomeaffordable.gov or by calling 888/995-HOPE.

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