I've been hollering about this for the last several weeks; the total failure of NAR to defend, notify and assist it's membership with the FTC MARS RULE.  As such, I am posting NAR's letter to the FTC requesting exemption for Realtors from the Rule and an email I sent to the authors of the letter and their response.  In part, having just paid my yearly dues for my Realtor license which, by the way, are more expensive than Arizona Bar dues for Attorneys, I believe every agent should complain to their local chapter and to NAR.  We've been completely blind sided by NAR's inaction and lack of support. 

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Here it is:

March 29, 2010Federal Trade Commission

Office of the SecretaryRoom H-135 (Annex W)

600 Pennsylvania Avenue, NWWashington, DC 20580

Re: Mortgage Assistance Relief Services Rulemaking Rule No. R911003Submitted electronically via: http://public.commentworks.com/ftc/MARS-NPRMDear Chairman Leibowitz:

On behalf of the 1.2 million members of the National Association of REALTORS® (NAR), I am pleased to provide comments on the Federal Trade Commission’s Notice of Proposed Rulemaking;request for comment regarding mortgage assistance relief services (MARS).The National Association of REALTORS® (NAR) is America’s largest trade association, includingNAR’s five commercial real estate institutes and its societies and councils. REALTORS® areinvolved in all aspects of the residential and commercial real estate industries and belong to one ormore of some 1,400 local associations or boards, and 54 state and territory associations ofREALTORS®.NAR broadly supports efforts to ensure that MARS services truly benefit consumers. NumerousNAR members have provided anecdotal evidence of subpar services and abusive schemes that are tothe detriment of homeowners in troubled situations. Efforts to weed out MARS providers that do nottruly work for the benefit of homeowners are therefore welcome. Nevertheless, NAR has someconcerns with the proposed rule and its potential application to real estate professionals in short saleand other sales transactions. We believe clarification is necessary to ensure that real estateprofessionals are not treated as acting in a MARS capacity when they are performing traditional realestate functions.MARS ProvidersNAR believes that a real estate professional acting in that capacity should clearly be excluded fromthe definition of “Mortgage Assistance Relief Service Provider”1 provided that they are notattempting to collect an upfront fee and/or otherwise holding themselves out to be a MARS provider1 §322.2(i)via advertising or other means and attempting to collect a fee at any point for such services. While the short sale is certainly on the menu of possible avenues of relief for a homeowner, the activity of the sale itself by a real estate professional is a distinct activity well within the customary activities engaged in by real estate professionals.Assisting and FacilitatingAdditionally, a real estate professional, engaged by a potential short seller on the advice of a MARS provider or by a MARS provider directly, should not face a presumption that they know or are consciously avoiding knowledge of the provider’s possible unlawful activity.2 The broad goal of the real estate professional is to sell the home in a manner that comports with the seller’s wishes. Unless strong evidence of some collusion is provided to the contrary, the mere involvement in a transaction that also involves a wayward MARS provider should not viewed as implicating the real estate professional, whose sole goal and task is to sell the property.Beneficial ResultsThe Commission should also examine more closely the requirement for beneficial results.3 Footnote 155 uses a short sale example where the MARS provider actively concealed the sales price from the lender. Clearly this is an egregious action that most likely violates a number of existing laws. However, this extreme example does not offer valuable guidance precisely because it is extreme. The Commission should be more careful in defining the term “beneficial” and in providing examples especially in the case of the outcomes of a short sale and other efforts to prevent foreclosure.The spectrum of outcomes facing a distressed homeowner is broad. An option such as a short sale, which is beneficial in its impact on the home seller’s credit record, is still not necessarily the kind of outcome that is going to produce an elated consumer. Nevertheless, it is generally agreed to be a better outcome than a foreclosure for both the seller and the community in which the home is located. The Commission should be careful not to discourage short sales and therefore promote foreclosures. MARS providers and other people in positions to offer advice might not do so out of fear of liability under this rule or from concern that they may not receive compensation if the outcome is not considered “beneficial.” A short sale will never be viewed as positively as other outcomes, such as a major loan modification that reduces principal and the monthly payment significantly and allows someone to stay in their home. The reality of current market and economic conditions precludes that scenario for large numbers of homeowners. In many circumstances, the least bad outcome is also the only good outcome.Incidental or De Minimis AdviceThe Commission posed the question whether the proposed Rule should exclude from the MARS provider category persons who provide incidental or de minimis advice. NAR believes the Commission should consider tailoring the definition to exclude persons such as real estate professionals who often provide advice to troubled homeowners but do not hold themselves out as providing MARS services or collect fees for such advice and services, except to the extent it may be part of real estate services covered by the traditional commission paid at closing. Real estate professionals are often contacted by past clients who are having problems paying their mortgage or fear they will lose their home. These professionals make a good faith effort to provide useful information and access to resources, even if there is no fee charged. In particular, REALTORS® adhere to a strict code of ethics and are licensed by their respective states. They2 §322.63 §322.5(a)(1)(ii)rely on their past clients for referrals and future business and therefore have a strong motivation to see a positive outcome achieved regardless of whether the situation yields any remuneration in the short run.If the rule is too stringent, it may create a disincentive for the real estate professional to provide such assistance, leaving the consumer without a valuable and knowledgeable resource. This is particularly true if the initial facts dictate that a short sale may be the best option. Real Estate professionals, seeing that their eventual work on a short sale (and subsequent potential commission) may be construed as making them a MARS provider, may be reluctant to accept the listing, leaving the consumer to find another broker and denying the consumer valuable advice. The Rule should cover those who hold themselves out as MARS providers and seek compensation in the form of fees for the advice and intermediation they provide, not real estate professionals providing counsel in the normal course of their real estate activities.Once again, NAR supports efforts to ensure that people who provide counseling, advice and other services to troubled homeowners are indeed providing a benefit for the fees they charge. However, we also strongly believe that our members, when acting in their capacity as real estate agents and brokers, should be exempted from this regulation.Thank you for your time and consideration in this matter. Should you or your staff have any questions or concerns, please do not hesitate to contact our Senior Regulatory Policy Representative, Scott Rinn at (202) 383-7508 or [email protected] or our Director of Real Estate Services, Ken Trepeta at (202 383-1294 or [email protected].

Sincerely yours,

Vicki Cox Golder,

CRB2010 PresidentNational Association of REALTORS®

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Here's my email requesting clarification:

To Scott Rinn and Ken Trepeta;

I manage my law firm’s Attorney Negotiated Short Sale Legal Division  and we have recently reviewed the FTC’s Mortgage Assistance Relief Services; Final Rule (“MARS”) due to numerous inquiries from our Realtor and short sale clients.  Additionally, I am a licensed Realtor in the State of Arizona.  In reading the Rule and rule making history, it is clear that any Realtor engaged in negotiating Or referring a short sale client to a third party negotiator is a MARS provider.  With a large proportion of Realtors engaged in short sale activities due to current market conditions (actively negotiating with lenders or referring  clients to such third party negotiators), it is very concerning that so many agents may be facing grave liability and financial sanctions due to such Rule breaking.

To date, I have been unable to find any reference, guidance or assistance from the National Association of Realtors (“NAR”) to Realtors who are or might be implicated due to their short sale activities.

My questions are as follows;  1)what is the position of NAR with respect to the Rule and its impact on Realtors who are directly negotiating or referring their clients to short sale negotiators, 2)what plan does NAR have for informing the Membership of its position and what are the timelines for such notification since the primary Rule is already enacted,  3)what type of assistance will NAR offer to their Membership who wish to be in compliance with the rule, and 4)if NAR makes a finding that Realtors who engage or refer clients to short sale negotiators are in violation of the FTC Federal Rule and as such, may not continue to be in such violation, will NAR recommend to the state Realtor boards that such state boards should enact localized rules disallowing such activity by Realtors.  If so, what might the proposed penalties be and how would it be regulated?

I realize that these questions are challenging.  However, with so many Realtors potentially incurring liability since the Rule was enacted December 29^th, 2010, I would respectfully request an answer by February 1^st, 2011.

Thank you for time and consideration,

tjs

Todd J. Sullivan J.D.*  , CDPE 

"Attorney Negotiated Short Sales"

Real Estate, Business Development & Marketing

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AND NAR'S RESPONSE:

NAR commented on the initial rulemaking and is preparing responses to questions raised by our members. We are also making additional inquiries with FTC. You might note that in footnote 126 I believe, in the preamble, FTC acknowledged our concerns in albeit a somewhat vague way. My colleague, Charles Dawson has taken over this issue from Scott Rinn, whom I was filling in for on a temporary basis. Mr. Dawson is currently the lead on this issue working with our Chicago legal department.

Kenneth R Trepeta Esq.
Director, Real Estate Services
[email protected]