Navigating Life on MARS
The Mortgage Assistance Relief Services (MARS) rule released by the
Federal Trade Commission last November to protect home owners from foreclosure
prevention scams has several unintended consequences for real estate
professionals who are involved in short-sale transactions. Laurie Janik, general
counsel for the National Association of REALTORS®, spoke about the rule during
the Risk Management and Licensing Forum Wednesday at the REALTORS® Midyear
Legislative Meetings.

MARS imposes
uniform requirements on businesses that market and provide mortgage relief
services to consumers and, therefore, applies to practitioners who negotiate
with sellers or lenders regarding short sales or who refer consumers to others
who do. Unfortunately, the disclosure requirements are confusing, Janik said,
because the rule writers weren’t actually looking at the role of real estate
professionals.

“[The rule] is not a good
fit for what you do,” said Janik, who has been talking with FTC staff about
changing the disclosure language to make it more relevant for real estate
professionals, or even making practitioners exempt from the disclosure
requirements.

Specifically, the rule
requires that MARS providers who advertise their short-sale expertise in
soliciting business disclose several facts, including:

·They are not associated with the government.
· They are not approved by the
government or lender.

· The lender may not agree to any changes proposed during the
transaction.

The rule bans all upfront
fees charged to consumers. It also requires that service providers specify what
they’ll charge before the consumer hires them and disclose the fee once again
before the seller completes a transaction. The rule requires that those two
amounts be the same.

However, since
lenders are known to reduce commissions paid to listing agents for short sales
before closing, it may be impossible for practitioners to comply with the
requirement that the fee disclosed to consumers be the same, Janik said.
Alternatively, if a practitioner leaves that section of the disclosure form
blank because no additional fee is charged for the short-sale negotiation
service over and above the broker’s commission, it could be misconstrued by the
client as an agent agreeing to accept no compensation for the
transaction.

The MARS language allows
consumers to stop doing business with a service provider any time, and Janik
said this clause could inadvertently suggest that the consumer could terminate
an entire listing agreement. (While agency representation is consensual, and
therefore, the client can always end the agency representation, an early
termination of a listing agreement exposes the seller to the payment of
damages.)

Based on her conversations with
FTC officials, Janik said she’s
optimistic that the FTC will make changes to the disclosure
requirements that will make the language more relevant for real estate
professionals or provide another meaningful accommodation. She said, in the
meantime, that she doesn’t expect the FTC to crack down on real estate
practitioners who are involved in short sales in the course of providing
traditional real estate services to sellers.

— Wendy Cole, REALTOR® Magazine

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