Let me preface this blog by stating I'm not a lawyer, but I've spoken with 3 independent attorneys in the last month all who have reviewed the MARS FTC ruling and the ONLY EXEMPTIONS are for attorneys (in particular cases) and even attorneys negotiating short sales have to make some changes.
This leaves the rest of us, Realtors, 3rd Party Negotiators, Originators, loan modification companies, exposed to potential liability. In my personal opinion when you read the whole ruling, you can see it was geared for loan modification companies taking up front fees, but unfortunately the ruling affects all of us in the short sale negotiation industry.
For Nick and I personally, this is just one more step we have to take in New Hampshire and Massachusetts in an already long and burdensome disclosure process. We are both short sale investors, so as it is, we already jump through hoops with disclosures to lenders, homeowners, agents, etc., so it wasn't a big deal for us to have our negotiation AND acquisition company become compliant with the MARS ruling.
I've spoken to quite a few of the Realtors that refer to us and there are so many that were unaware at how this affected them. For those of you that don't know my partner Nick, IS a Realtor and together our firm negotiates for many other Realtors, homeowners, etc .. New Hampshire already has some crazy laws for negotiators, but add to the fact that they recently made a statement that "REALTORS must be careful when handling short sale transactions to NOT negotiate with the lender on the property owner's behalf."(page 2 last paragraph of bulletin http://www.nhar.org/member-services/legal-committee-resources/potential-ramifications-of-the-safe-act-for-realtors/) then I'm at the point where I feel like I need to throw in the towel and I'm not even a Realtor!! WHAT? So a Realtor can't negotiate on a homeowner's behalf. Interesting...so we are considering "facilitator" in our listing agreements. So let's add this CRAZY MARS ruling prohibiting all of us from negotiating without being in compliance with the new laws. I truly feel on top of short sale rules, regulations, guidelines, you name it and even for me, the amount of legislation dictating short sale negotiation is overwhelming.
No matter how you look at it, the new ruling is controversial. Unfortunately it leaves a lot open for interpretation, but understand this, NO ONE IS EXEMPT except for certain lawyers.
Thankfully we have NEVER taken an up front fee to negotiate a short sale. Our fees aren't paid by agents or sellers, so I didn't feel initially this applied to us, but after speaking with our personal attorney, at Kliman Law, we immediately changed all our paperwork for compliance AND even added disclosures to the buyers of the properties we negotiated.
Page 35 footnote 136 seems to be the paragraph that is causing a lot of the confusion:
"As a general matter, the Final Rule is not intended to apply to the marketing of services to assist consumers in selling their properties to third parties. The Final Rule, however, does specifically cover the marketing of services involving the sale of properties to third parties if those services are designed or intended to assist consumers in averting foreclosure, e.g., through a short sale or deed-in-lieu of foreclosure. One commenter urged the Commission to exempt licensed real estate professionals from the Final Rule. NAR at 1-2. The commenter argued the Rule would restrict real estate agents in helping consumers with the process of selling their homes through short sales. Id. The Commission concludes that an exemption for real estate agents is not necessary. Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS."
The interpretation from the lawyers I spoke with all commented that when the commission stated they were aware that agents performed "THESE" functions they were referring to the previous sentence stating an agent's normal role is to assist in buying, selling and showing homes and to keep in mind it was defined earlier in the ruling that anyone that performs negotiation services on short sales was in need of compliance.
I've done a little independent research on my own because being a 3rd party negotiator, we are open to liability every time we start another short sale, but I did see particular states already putting forms for compliance together by their local associations. I have YET to see New Hampshire or Massachusetts come forward with a public statement OR any assistance with forms. Considering the extremely conservative approach New Hampshire took with their bulletin on the SAFE act, I'm shocked they weren't on top of the MARS FTC compliance issues. NAR, MAR and NHAR seem to be asleep on this subject.
I'm not a Realtor, but I do empathize with anyone feeling this new law is a little overkill. Please understand being an investor, we are subject to this type of compliance in short sales on a daily basis. For me it was another change of paperwork, which changes monthly anyways. This ruling even affects how we all do our marketing to distressed homeowners.
What I do need all of the agents that refer to us to be aware of is even if you JUST refer the short sale to us at Short Sale Mitigation, LLC, that you MAY still need to be compliant with this law even if you are NOT negotiating with the lender. The ruling states if you as a real estate agent have an affiliation with the short sale negotiator, you are also held to the same requirements as the negotiator and you must comply with MARS.
I'm highlighting the areas I feel are most important below. Feel free to email or contact me if you have questions working with us, but most definitely talk to your attorneys and GET COMPLIANT if you are working on short sales.
Maryann Little, Short Sale Mitigation, LLC
Nick Aalerud, AA Premier Properties, LLC
In any advertising and in communications directed at individual consumers (such as telemarketing), you must make the following disclosures:
- you are not associated with the government, and their services have not been approved by the government or the homeowner's lender;
- the lender may not agree to change the consumer's loan; and
- if you tell consumers to stop paying their mortgage, you must also tell them that they could lose their home and damage their credit rating. (We have never nor will EVER suggest this to a homeowner)
- a homeowner can stop doing business with the company at any time,
- a homeowner can accept or reject any offer you obtain from the lender or servicer, and
- if they reject the offer, they don't have to pay your fee - fee must also be disclosed
The MARS Rule prohibits you from making any false or misleading claims about your services, including:
- the likelihood of consumers getting the results they seek;
- the company's affiliation with government or private entities;
- the consumer's payment and other mortgage obligations;
- your company's refund and cancellation policies;
- whether you have performed the services you've promised;
- whether you will provide legal representation to consumers;
- the availability or cost of any alternative to for-profit assistance relief services;
- the amount of money a consumer will save by using their services; or
- the cost of the services.
In addition, the rule prohibits you from telling homeowners to stop communicating with their lenders or their representatives. Further, you must also have reliable evidence to back up any claims you make about the benefits, performance, or effectiveness of the services you provide.
Lastly, it is a violation of the MARS Rule for any person to provide substantial assistance or support to a MARS Provider when that person knows or consciously avoids knowing that the MARS Provider is engaged in any act or practice that violates this Final Rule. (16 CFR Section 322.6).
SO What Exactly Are Mortgage Relief Services?
Mortgage Assistance Relief Services (MARS) are services offered or provided to a Consumer for consideration that are intended directly or indirectly to assist the Consumer with regard to:
- Stopping or postponing a foreclosure sale;
- Negotiating or arranging a Modification of a Dwelling Loan;
- Obtaining a forbearance in the timing of payments due on a Dwelling Loan;
- Negotiating or arranging any extension of the time period for curing a default or reinstating the Dwelling Loan;
- Obtaining a waiver of an acceleration clause or balloon payment in a Dwelling Loan;
- Negotiating or arranging a short sale, deed-in-lieu of foreclosure, title reconveyance, sale/leaseback or any other disposition of the Dwelling other than a sale to a third-party purchaser;
- Offering or conducting a Forensic Loan Audit which is a legal analysis of mortgage loan documents for the purpose of finding compliance violations under federal and/or state law or regulation for the alleged purpose of helping Consumers acquire leverage over their Servicers;
- Marketing of services to assist consumers in selling a Dwelling to a third party if the intent of the sale is to enable the Consumer to avoid foreclosure; and
- Marketing of refinancing options by Mortgage Brokers if offered to avoid a foreclosure.
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