With pandemic-related moratoriums on home foreclosures ending soon, scam foreclosure relief companies will also start taking advantage of desperate homeowners again. Both federal and state law limit what companies can do for people struggling to pay their mortgage. “Foreclosure consultants” are regulated by state law and federal regulations apply to companies claiming to offer mortgage assistance relief services. Here are some of the rules applying to these companies:
- Foreclosure relief companies must provide detailed notices explaining a homeowner’s rights, including that a homeowner can’t be required to pay fees in advance of the services being completed. Homeowners must also be told they can cancel any agreement within three days.
- Companies can’t accept payment of fees until a mortgage modification with terms satisfactory to the homeowner has been obtained.
- Homeowners must be given several disclosures, including that (a) the company is not associated with the government and not approved by the government or the homeowner’s lender; (b) lenders may not agree to modify a homeowner’s loan even if the company’s services are used; and (c) homeowners can terminate a company’s services at any time.
- Foreclosure relief companies can’t forbid a homeowner from contacting their mortgage lender or servicer on their own.
- Companies can’t make misrepresentations about (a) the likelihood of obtaining a mortgage modification; (b) the amount of time it will take to obtain a mortgage modification; (c) the completion of services that would give the company a right to demand payment; (d) the availability of legal representation from the company; and (e) the right to a refund of fees.
Foreclosure consultants or foreclosure relief companies who violate these rules can be sued by homeowners and the homeowners can receive damages and payment of any necessary attorney fees.
A far better solution for homeowners facing foreclosure and mortgage default is to file Chapter 13 bankruptcy. This type of bankruptcy allows homeowners to cure the default over a period of time and get back to making regular monthly mortgage payments. See http://thompsonlawoffice.net/791/mortgage-payment-defaults-in-chapter-13-bankruptcy/.