Perhaps the most prized possession of an average American is his or her home (although the iPhone is catching up). While it still retains its status as the ultimate expression of achieving the American Dream, at no time in US history was this dream subject to peril as it has been after the 2008 collapse of the housing market.
What could be worse in one's moment of desperation and need of assistance than to be taken advantage of by some unscrupulous individual or a company that will claim to protect you but in reality take your money and disappear? As these fraudulent schemes made their way into the public eye, Federal and State governments responded with important protective laws.
Mortgage Assistance ReliefServices (MARS) is a federal regulation that applies to all businesses that offer a mortgage relief service, most popular of which is a Modification of one's loan. Modification is a negotiated restructuring of a mortgage in order to allow homeowners to keep their homes. Some people will receive principal and/or interest reduction. Others will see their loan stretch from the current remaining term to a new 40 year term, in order to make the monthly payment affordable. A person can attempt to negotiate with the Bank or the Servicer on his own, or hire a professional. But what type of a professional should one use? And how should such a professional be compensated? MARS clearly instructs that no individual or company can charge an upfront fee for such services, unless the work is being performed by an attorney in his or her regular course of representation.
New York State passed a similar law and codified it under Real Property Law §265b: DistressedProperty Consulting Contracts. The law clearly states that individuals or companies that offer consulting services cannot charge fee, until after the services are provided. The only people who are an exception to this rule are attorneys.
What all this legal jargon means at the end of the day can be more simply explained through a classic scenario that many homeowners can easily relate to. John Homeowner has fallen on hard times and defaulted on his monthly mortgage payments. Mr. Homeowner is facing foreclosure and does not know what to do. He would like to keep his home. Many letters are arriving in his mailbox daily offering help to save his home and hold on to his American Dream. Mr. Homeowner should visit several places for consultations and compare prices and advise. Most importantly Mr. Homeowner should keep one thing in mind: if at the end of the consultation a price is quoted for the service, to be paid up front, and Mr. Homeowner knows that he is not speaking to an attorney at a Law Firm, then two thing are guaranteed at that point: law is being broken and Mr. Homeowner is about to be taken for a ride.