The advance fee ban under the FTC’s Mortgage Assistance
Relief Services (MARS) Rule is designed to protect
financially distressed homeowners from mortgage relief
scams that have sprung up during the mortgage crisis.
“Banning the collection of up-front fees will protect
homeowners from being victimized,” FTC Chairman Jon
Leibowitz said. “This is especially important at a time when
so many people are behind on their mortgages or facing
foreclosure.”
As of January 31, 2011, companies that offer to help
homeowners get their loans modified or sell them other types
of mortgage assistance relief services are no longer allowed
to charge up-front fees. Under the rule, a mortgage
assistance relief company may not collect a fee until the
consumer has signed a written agreement with the lender that
includes the relief obtained by the company. When the
company presents the consumer with that relief, it must
inform the consumer, in writing, that the consumer can
reject the offer without obligation and, if the consumer
accepts, the total fee due. Before the consumer agrees to
accept the mortgage relief, the company must also provide a
written notice from the lender or servicer showing how the
relief will change the terms of the consumer’s loan
(including any limitations on a trial loan modification).
During the past three years, the FTC has filed 32 lawsuits
against mortgage assistance relief companies for deception
and abuse, and state law enforcers have filed hundreds of
additional cases. The
MARS Rule issued in November
gives the FTC and the states an additional tool for
combating deceptive and unfair acts or practices by these
entities.
Attorney exemption
Attorneys are generally exempt from the rule if they provide
mortgage assistance relief services as part of the practice
of law, are licensed in the state where the consumer or
dwelling is located, and comply with state laws and
regulations governing attorney conduct related to the rule.
To be exempt from the advance fee ban, attorneys must also
place any advance fees they collect in a client trust
account and abide by state laws and regulations covering
such accounts.
Information for Businesses and Consumers
FTC staff has issued two new business education
publications.
“The Mortgage Assistance Relief
Services Rule: A Compliance Guide for Business”
describes the key provisions of the MARS Rule to help
covered businesses ensure that they are in compliance.
“The Mortgage Assistance Relief
Services Rule: A Compliance Guide for Lawyers”
contains specific guidance for attorneys who provide
mortgage assistance relief services. The staff has also
issued a consumer publication,
“Mortgage Assistance Relief
Scams: Another Potential Stress for Homeowners in Distress,”
which relates how to spot and avoid these scams
