Thursday, Sept. 17, 2009 | 9:30 a.m.
The head of the Federal Trade Commission said Thursday the agency is considering banning upfront payments to companies that advertise help for borrowers who are in trouble on their home loans.
Government officials say scammers seeking to take advantage of borrowers in danger of default often charge upfront fees of $1,000 to $3,000 for help with loan modifications that rarely, if ever, pay off.
“If you are concerned about keeping your home, avoid any company that asks you for a large fee in advance. That is a real red flag,” said Jon Leibowitz, chairman of the FTC. Such upfront fees are already prohibited in 20 states.
His comments came as his agency announced it filed civil charges against two companies, San Diego-based Nations Housing Modification Center and Infinity Group Services of Orange County, Calif.
The government accused both companies of charging homeowners large fees for assistance in working with their lenders, but doing “little or nothing” to actually help borrowers.
Leibowitz said the FTC was also considering restrictions on how mortgage rescue companies can advertise their services. Ads for loan modification companies frequently appear on late-night TV and on billboards in some parts of the country. Nations Housing, for example, mailed homeowners official-looking letters purporting to be from an address on Pennsylvania Avenue in the nation’s capital.
They were designed to trick consumers into thinking that they were participating in a government program, regulators said.
The government has filed charges against 22 companies operating such schemes and say the firms often have names or ads designed to make borrowers think they are using the Obama administration’s efforts to help modify or refinance millions of mortgages.
On Thursday, 12 state attorneys general met with U.S. Attorney General Eric Holder, Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to discuss their anti-fraud operations.
“A lot of these scams operate nationwide, from outside our borders,” said Connecticut Attorney General Richard Blumenthal.
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