Patrick Administration and Attorney General Announce Efforts to Protect Distressed Homeowners
Companies Claiming to Help Avoid Foreclosure or Negotiate Mortgage Loan Modifications Prohibited from Charging Fees
The letter clarifies that mortgage brokers licensed by the Division may not charge borrowers a fee or receive any compensation from any source for assisting in the process of obtaining a loan modification from a borrower's mortgage holder. The letter further explains that any fees charged by the borrower's mortgage holder to revise the particular terms of a mortgage loan are strictly limited in scope and amount under state law.
The Division has recently seen an increase in companies aggressively marketing their services with claims to help consumers avoid foreclosure or negotiate a loan modification at substantial additional costs to consumers. The Obama Administration, through the Treasury Department, recently announced its "Making Home Affordable" Modification Guidelines to facilitate loan modifications. Consumers should contact their lenders for information. In addition, information on non-profits providing foreclosure prevention assistance is available on the Division's website www.mass.gov/dob.
"Consumers should contact their mortgage lender or servicer directly to work out a loan modification or contact a non-profit agency who will offer assistance without additional cost," said Steven L. Antonakes, the Commissioner of the Division of Banks.
The issuance of this industry letter today enhances the consumer protections initiated by a 2007 state law which provided all borrowers with a 90-day right to cure a default of a mortgage loan prior to a lender moving ahead with a foreclosure. The 2007 law strictly prohibits the charging of any fees in connection with the right to cure during the 90-day period.
According to Commissioner Antonakes, "The overriding purpose of the 2007 law and this industry letter is to provide assistance and foreclosure relief to homeowners."
In supporting the Division's actions, Attorney General Martha Coakley, stated, "Our office has observed a new business model that preys on distressed homeowners, claiming to help obtain loan modifications from lenders for a significant fee. In just the past two weeks, our Consumer Protection Division has brought two enforcement actions and obtained injunctions that prohibit companies from charging advance fees for loan modifications and bar false advertising that promises loan modification results. We will continue to make this a priority." Both cases, against "Loan Mods By Lawyers" and the "Loan Modification Group" are pending in Suffolk Superior Court.
The Attorney General's 2007 regulation prohibits foreclosure-rescue schemes and also prohibits a company from charging certain fees in connection with foreclosure-related services, including providing assistance with obtaining a loan modification on behalf of a borrower.
"The Division's announcement today on charging fees, with respect to the mortgage professionals it licenses, is another important step by the Commonwealth. The goal of our combined efforts is to make sure these unfair practices do not harm Massachusetts homeowners when they are most vulnerable," said Attorney General Coakley.