16 CFR Parts 317 and 318: Mortgage Acts and Practices Rulemaking
My comment is specific to the proposed rule for the Mortgage Assistance Relief Services Rulemaking, that addresses the practices of entities (other than mortgage servicers) who offer assistance to consumers in dealing with owners or servicers of their loans to modify them or avoid foreclosure. In addition to entities that provide mortgage assistance and relief services that involve modification to loans to avoid FORECLOSURES, I would also include entities that provide DEBT ELIMINATION/REDUCTION services to consumers so that they can pay off/reduce their debt faster and start to build wealth based on the interest saved. I subscribed to this service and I have submitted a complaint with my state consumer protection agency for breach of contract, unfair and deceptive practices, and possible violation to securities laws. The debt elimination strategies that I was taught involve applying for additional revolving lines of credit products to pay off fixed rate and long term loans and then use that extra interest savings to purchase other investments, primarily real estate. However, the training sessions that I attended, involved unlicensed (securities) presenters that encouraged consumers to borrow from their retirement accounts to fund real estate properties, become private lenders from internet sites and be able to charge your own interest rate to make money from consumers who cannot obtain traditional loans from banks, and that the entity guarantees (on their website) the success of their program. Although these debit elimination services are optional, it is no different from servicers that try to prevent "foreclosure" because a fee is still charged for the service and credit products are the common denominator.- which any recommendation (good or bad) can taint one's credit/financial profile. Given the current economic environment of people losing their jobs and can no longer afford to make payments to their loans (loans that are required in order to subscribe to the debt elimination service) these entities are placing these consumers in a more vunlnerable situation. When my husband lost his job, one of the advisors advised me to apply for more debt (credit cards) or use my personal line of credit to stay afloat and then apply for more credit cards (since my credit score was good). This seemed a bit odd since I was trying to find a way to reduce/eliminate my debt. Then, he invited me to attend a seminar on how to make additional income (for people in my situation) within 3 years. And, this involved the strategy of looking for borrowers online to lend money to and then charge them whatever interest rate I wanted. So, essentially, these borrowers are using my good credit on a loan that they wouldn't have been approved for by a bank or other institutional lender. Some of these practices may be legitimate, but because a consumer has to have a mortgage and other revolving loans to subscribe to the service for a fee ($3,500 or 6% of total debt), there is a fine line between unfair and deceptive practices and legitimate business practices when the service relies on credit activity, credit products and mixing them with investment products. These entitites that offer this type of debt reduction and elimination services should be subject to the same rules as mortgage services as well as securities laws (if they are advising consumers to use their retirement funds, deposit accounts, and investments to fund real estate) because these entities are looking at one's assets that includes their debt and income levels, charging a fee for such service, guaranteeing success for providing the service, but not disclosing or advising to the consumer that any change in income levels or life changes, will adversely impact the worthiness of the program and the services that come with it. I strongly suggest to the FTC to conduct an investigation of these entities and include them into this legislation to strengthen our consumer protection laws.