WASHINGTON -- You've probably seen the pitches on TV and the Internet or found them stuffed in your mail: official-looking communications complete with logos and letterheads that look vaguely like those used by the Treasury, IRS and other federal agencies.
The promoters have names that resemble federal foreclosure-intervention programs such as Making Home Affordable or Home Affordable Modification. Some even flash photos of President Obama or the great seal of the United States.
They are instead criminal enterprises posing as do-gooders who promise to get you out of the mortgage jam you're in, whether you're severely delinquent or deeply underwater. They claim they can persuade your lender to cut your monthly payments, forgive all penalties, slash your interest rate and even get your loan balance reduced. If your lender won't cooperate, they say they'll perform "forensic audits" on your mortgage and convince a court to cancel your entire loan transaction because of technical mistakes in the paperwork.
Bogus firms always insist on getting your money upfront -- often thousands of dollars -- and then do little or nothing. But now the Federal Trade Commission is cutting off the main fuel supply for mortgage modification scammers: Under new rules outlined Nov. 19, the agency plans to ban virtually all upfront payments, institute mandatory disclosure rules, and clamp new federal restrictions on lawyers who participate in mortgage modification schemes.
Under these rules, companies offering mortgage relief will have to contact your lender or servicer and present you a written proposal describing the key changes to your mortgage terms that the note holder is willing to make before any money can be collected in advance.
Modification companies also will be required to make clear they have no connection with any government agencies or program, and that you're free to reject any offer from the lender, with no requirement to pay a fee. The rule also prohibits modification firms from using one of their most commonplace and destructive ploys: They can no longer instruct clients to stop communicating with their lender or servicer. Many scammers not only urge unwary consumers to let them handle all negotiations but also direct them to stop sending in payments -- or worse, to send all payments to the modification company. Typically that has the effect of rendering any ultimate modification with the lender or servicer even less likely.…