The MARS FTC Rule- Intended for Short Sale Agents or Loan Modification Scam Artists?

Not surprisingly, as someone who specializes in Phoenix Short Sales, I received several emails last week regarding the latest MARS (Mortgage Relief Assistance Services) Rule that was enacted in November/2010, with a start-date of December 29, 2010.  There were also a few blog posts on ActiveRain on the subject.

Every email I received was from fellow Phoenix real estate agents/brokers, and each referenced an article written last week by Kevin Hardin of the Thomson Law Group.  Naturally, in all cases, I was asked "What are your thoughts?"

While I admit I have not gone through the 160+ page document in it's entirety, I have read "bits and pieces" of it, as well as several blogs/articles, etc., and attended a seminar today that dealt primarily with this new rule.  In addition, I took the time to contact my favorite real estate attorney for his thoughts.  Obviously, as the owner of a company who specializes in Phoenix short sales, I'm very interested in reading the opinions of others.

Tonight, I'll share what I have gathered thus far (this is a compilation of what I've read, what I gathered from the seminar today, as well as what I've gotten from the attorney I've used for 10+ years for my real estate issues).  I am not an attorney, am not giving legal advice, yada, yada, yada...I'm just giving my opinion....In other words, do not take this as legal advice. :)

1. ADVERTISING:  So-called "short sale experts" that claim to close "XX% of their transactions need to put on full alert!   Agents that quote a percentage closing rate need to be ready to prove it.  Also, agents/brokers that say they will close a short sale in XX days need to be put on notice.  It's very simple for agents to verify your assertions through the local MLS. Read the FTC Rule to get clarification on this.

2. DISCLOSURE:  It appears that there may be a few written "disclosure issues" that need to be dealt with in regards to short sales.  I do not see this as a big deal.  Add it to your website, mailers, letterhead, etc.  We are all used to this. Read the FTC statement to see what is needed.  A few sentences to CYA...  Again, no biggie.

3. ADVANCED FEES: Sorry, but if you've been charging fees in advance for handling short sales, you may need to change your structure.  In most cases, this is not an issue.  Again, read the FTC release to learn more.

The bottom line is this...  The new FTC rule is an attempt to crack down on the "loan-mod" scumbags that have caused so many of our short sale clients heartache over the past several months/years.  One of the attorneys (the one that doesn't handle short sale negotiations, started off her speech with this tidbit).  Don't believe me?  Read the first three paragraphs and you will see what the intent is.  THANK GOD FOR THIS RULING!

Now, for my personal assessment...

Beware of the many articles/blogs you will read over the next several days/weeks/months in regards to this new rule. This ruling has put "blood in the water" for attorneys that would love to scare the hell out of real estate agents that deal with short sales.  While some of what I've read has merit (in my humble opinion), the majority of articles I've read have been written by law firms that deal primarily in short sale negotiations.  As a matter of fact, the seminar I attended today began with a law firm whose focus is just that...Negotiating on behalf of short sale agent's clients.

You see, there is an important "caveat" to this new ruling...Only attorneys can charge an up-front fee, not real estate agents.  Also, this particular attorney that started the seminar charges a 3% fee (minimum of $2,000) at close of escrow in addition to the $750 for first mortgage, $250 for 2nd mortgage paid up-front.  Think about this.. Try asking your Phoenix short sale client (who can no longer afford to make their mortgage payment) to come up with $750 or $1,000. Think that will fly with them?  I seriously doubt it.

Until NAR and/or your local association issues a legal opinion on this new FTC/MARS rule, I would suggest you proceed with caution, and I would ask you to contemplate a very important question as it pertains to this new rule when reading through the document provided by the FTC....

The attorneys that held the seminar today thought it was humorous that the AAR (Arizona Association of Realtors) and NAR have not released a statement regarding this issue as of yet.  In their opinion, they felt that the reason we as Realtors have not heard anything from NAR (or AAR for that matter) was because they were not aware of it yet. My question is,  could it be that this "rule" has little, if anything, to do with agents/brokers who are trying to consummate a short sale, and thus, neither the NAR or AAR feels it is necessary to issue a statement?

As real estate agents/brokers, are we really "negotiating" on behalf of our clients, or are we helping them to procure a short sale and "processing" the documents that their lender requires?  What is the legal definition of "negotiating"?

Today, when I posed these questions to the attorneys that held the seminar I attended, they could not answer either of them.  I would challenge each of you to ask the same questions of your favorite local real estate attorney before believing everything you read.

Today, when another agent asked how many short sales the attorney's firm had successfully negotiated in the past year, he regretfully replied "eight or nine".  Hardly an expert, in my humble opinion..

As always, I'm writing this blog to get the opinions of "fellow experts".  Feel free to comment at will....

Until next time....

 

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Bob Hertzog

Summit Home Consultants

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