Many states have already squashed up front fees for companies doing loan modifications.  Now the FTC is seeking a rule change to ban the practice nationwide in an effort to curb fraud in that industry. If the FTC rule goes into effect even loss mitigation attorneys will be required to have evidence of a loan modification acceptance before they can charge for the service.

The FTC has filed suit against 28 companies that purport to help people in foreclosure keep their homes.  State agencies have filed law suits against hundreds of other organizations.

One of the practices that are a tell-tail sign of deceptive practice is use of advertising that makes the loan modification company look as if it is coming from a government agency or from the Make Home Affordable program.

If the rules go through, disclaimers will be required to disclose that the modification company is for-profit, cannot guarantee success in causing the Lender to modify the loan, and does not require the Homeowner to stop communicating with the Lender.  Loan modification specialists who are also assisting with a bankruptcy for the Homeowner may have limited exemption from the rules.

Attorneys and others may comment on the proposed rule at the FTC’s notice of proposed rulemaking site.