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Loan Modification Overview
A Loan Modification is a permanent change in one or more of the terms of a mortgagor's loan which allows the loan to be reinstated. The results are usually more favorable payment terms the mortgagor can afford.
The Federal Trade Commission has proposed a new rule that would prohibit third parties, including loan modification specialists and loss mitigation attorneys, from collecting payment for foreclosure prevention services until after they obtain a documented offer from a lender or servicer for a modification or other form of mortgage relief.
The proposed rule also would bar providers from telling consumers to stop communicating with their lenders or mortgage servicers. It would also require them to disclose to consumers that they are for-profit businesses, the total amount consumers will have to pay, that neither the government nor the lender has approved their services, and that there is no guarantee that the lender will agree to change their loan.
The rule would apply to all for-profit companies that, in exchange for a fee, offer to work with lenders and servicers on behalf of consumers to modify the terms of mortgage loans or to take other steps to avoid foreclosure. Entities that own or service mortgage loans are exempt, and attorneys would have limited exemption if they represent the consumer in a bankruptcy or other legal proceeding.
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