Feds Examine Banning Upfront Fees on Loan Modifications

(MoneyWatch)  If you need to modify a crippling mortgage, you're not the only one -- estimates are that some three million mortgages still need to be modified.
Unfortunately, that many homeowners in distress has created a climate that's ripe for fraud. Now, according to Jim Puzzanghera of the Los Angeles Times, the FTC is weighing a ban on upfront fees for mortgage modifications.

The story notes that charging upfront fees is already illegal in some places -- for example, Los Angeles. The argument is that this rotects consumers, because someone paying for help getting a loan modified doesn't necessarily know if the loan modification will actually go through.

Also note that help is available for free in some states. Earlier this week, for example, reporter Matt McKinney of WFMY News 2 noted that North Carolina attorney general Roy Cooper was expanding a state program to counsel homeowners facing foreclosure.

The help includes a website www.fightncforeclosure.com which answers homeowner questions.

If you're in mortgage distress -- or think you might be -- it's a site worth looking at, even if you're not from North Carolina. Kudos to the designers for explaining some of these thorny issues in plain English.

My favorite bit is titled "Am I Safe?" which provides a link to the National Foundation for Credit Counseling's 12-question quiz about your mortgage.

Questions include "do you owe more on your mortgage than your home is worth?" That's a question that, according to The Wall Street Journal, nearly one out of every six homeowners can answer affirmatively.

If you're in that 16 percent, keep your wits about you. And, until the FTC moves forward on a total ban, watch out for upfront fees.

Read More:

• Demystifying Adjustable-Rate Mortgages
• Mortgage Modification: Good and Bad Banks