UNDER FTC MARS RULING, REALTORS CANNOT NEGOTIATE SHORT SALES WITHOUT BEING IN COMPLIANCE ($11,00 penalty per day)

This new ruling (16 CFR Part 322) came in under the regulatory framework of the FTC and very people or organizations seem to be aware of it.  Please read the ruling.  Footnote 126 directly refers to the NAR requesting an exemption for Realtors and the FTC denying such.  IF YOU ARE NEGOTIATING A SHORT SALE, YOU MUST BE IN COMPLIANCE WITH THE RULE which is burdensome. I am presenting the first seminar today to a Realtor group and shall hopefully 1)make it out of the seminar alive, 2)provide a process for Realtor compliance so they can continue short sale negotiations.  If not, who will handle the negotiations? (most attorneys are overburdened and not knowledgeable in the daily negotiation process). 

WHERE WAS OUR REPRESENTATION TO INFORM US OF THIS NEW RULING? Just curious!

126: 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.

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What does this:but does not consider these services to be MARS, mean?

Just from reading Footnote 126, and specifically this:  The Commission concludes that an exemption for real
estate agents is not necessary...that would appear to imply that further language clarifying an exemption for agents is not necessary because they are NOT attempting to prohibit agents from assisting with SS negotiations.

 

Thanks for your efforts in bringing this to light and taking the time to analyze the ruling.

Todd. Read the response. It clearly states that what agents do is NOT considered MARS. This FTC ruling does not apply to us.

This primarily will apply to 3rd party negotiators.  We've used 3rd party negotiators and the good ones are already compliant.

You are correct that if the agent is acting in their normal course of business by "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.

However, if the agent is acting in any capacity under Section 322.2 DEFINITIONS (i) ‘‘Mortgage Assistance Relief Service’’ means any service, plan, or program, offered or provided to the consumer in exchange for consideration
that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following: and followed by subsection (6) Negotiating, obtaining or arranging:
(i) A short sale of a dwelling,
(ii) A deed-in-lieu of foreclosure, or
(iii) Any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.

If so, that Realtor is a MARS provider and must comply with all the statutory requirements under the FTC Final Rule.  In addition to the  Realtor having to comply with the MARS requirements, if you provide a referral to a negotiator, you are also under the MARS requirements as identified by Subsection (j) ‘‘Mortgage Assistance Relief Service Provider’’ or ‘‘Provider’’ means any person that provides, offers to provide, or arranges for others to  provide, any mortgage assistance relief service...."  ie: if an agent refers the client to a third party negotiator, that agent falls under the MARS requirements.


**Remember, if you are implicated in the MARS regulatory scheme, it just means that you need to comply with their requirements of disclosure, record keeping, etc. (plus, no upfront fees).

I have attached the complete rule here.  Three of our in-house attorneys plus two outside council have reviewed the Rule and are in agreement. 

As a licensed real estate agent, I'm wondering where NAR was and why my local and state associations have not issued any statements or programs to help realtors understand and be in compliance.

 

Thanks for reading my response.

tjs

 

Bryant Tutas said:

Todd. Read the response. It clearly states that what agents do is NOT considered MARS. This FTC ruling does not apply to us.
Attachments:

Todd I will have my attorney review this and give me his opinion. However I completely disagree with the opinions you have given. The FTC is pretty clear when they outlined the purpose of this ruling:

 

"The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis. Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more."

 

There is nothing in that paragraph that has anything to do with agents. Now having said that I do believe in erring on the side of caution. I already have disclosures in place and have for a couple of years now.

 

Todd J Sullivan J.D. said:

You are correct that if the agent is acting in their normal course of business by "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.

However, if the agent is acting in any capacity under Section 322.2 DEFINITIONS (i) ‘‘Mortgage Assistance Relief Service’’ means any service, plan, or program, offered or provided to the consumer in exchange for consideration
that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following: and followed by subsection (6) Negotiating, obtaining or arranging:
(i) A short sale of a dwelling,
(ii) A deed-in-lieu of foreclosure, or
(iii) Any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.

If so, that Realtor is a MARS provider and must comply with all the statutory requirements under the FTC Final Rule.  In addition to the  Realtor having to comply with the MARS requirements, if you provide a referral to a negotiator, you are also under the MARS requirements as identified by Subsection (j) ‘‘Mortgage Assistance Relief Service Provider’’ or ‘‘Provider’’ means any person that provides, offers to provide, or arranges for others to  provide, any mortgage assistance relief service...."  ie: if an agent refers the client to a third party negotiator, that agent falls under the MARS requirements.


**Remember, if you are implicated in the MARS regulatory scheme, it just means that you need to comply with their requirements of disclosure, record keeping, etc. (plus, no upfront fees).

I have attached the complete rule here.  Three of our in-house attorneys plus two outside council have reviewed the Rule and are in agreement. 

As a licensed real estate agent, I'm wondering where NAR was and why my local and state associations have not issued any statements or programs to help realtors understand and be in compliance.

 

Thanks for reading my response.

tjs

 

Bryant Tutas said:

Todd. Read the response. It clearly states that what agents do is NOT considered MARS. This FTC ruling does not apply to us.

Having another attorney look at it would be great!  When I first read the Rule last week, I was shocked at what I was reading.  That's one of the reasons I had other attorneys review the Rule.  Please share with what you learn.  I am hoping that I'm wrong on this for many reasons including the fact that we have not been in compliance for the last month. 


Thanks for looking into it.


tjs

 

Bryant Tutas said:

Todd I will have my attorney review this and give me his opinion. However I completely disagree with the opinions you have given. The FTC is pretty clear when they outlined the purpose of this ruling:

 

"The FTC is issuing the Mortgage Assistance Relief Services (MARS) Rule to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis. Bogus operations falsely claim that, for a fee, they will negotiate with the consumer’s mortgage lender or servicer to obtain a loan modification, a short sale, or other relief from foreclosure. Many of these operations pretend to be affiliated with the government and government housing assistance programs. The FTC has brought more than 30 cases against operations like these, and state and federal law enforcement partners have brought hundreds more."

 

There is nothing in that paragraph that has anything to do with agents. Now having said that I do believe in erring on the side of caution. I already have disclosures in place and have for a couple of years now.

 

Todd J Sullivan J.D. said:

You are correct that if the agent is acting in their normal course of business by "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.

However, if the agent is acting in any capacity under Section 322.2 DEFINITIONS (i) ‘‘Mortgage Assistance Relief Service’’ means any service, plan, or program, offered or provided to the consumer in exchange for consideration
that is represented, expressly or by implication, to assist or attempt to assist the consumer with any of the following: and followed by subsection (6) Negotiating, obtaining or arranging:
(i) A short sale of a dwelling,
(ii) A deed-in-lieu of foreclosure, or
(iii) Any other disposition of a dwelling other than a sale to a third party who is not the dwelling loan holder.

If so, that Realtor is a MARS provider and must comply with all the statutory requirements under the FTC Final Rule.  In addition to the  Realtor having to comply with the MARS requirements, if you provide a referral to a negotiator, you are also under the MARS requirements as identified by Subsection (j) ‘‘Mortgage Assistance Relief Service Provider’’ or ‘‘Provider’’ means any person that provides, offers to provide, or arranges for others to  provide, any mortgage assistance relief service...."  ie: if an agent refers the client to a third party negotiator, that agent falls under the MARS requirements.


**Remember, if you are implicated in the MARS regulatory scheme, it just means that you need to comply with their requirements of disclosure, record keeping, etc. (plus, no upfront fees).

I have attached the complete rule here.  Three of our in-house attorneys plus two outside council have reviewed the Rule and are in agreement. 

As a licensed real estate agent, I'm wondering where NAR was and why my local and state associations have not issued any statements or programs to help realtors understand and be in compliance.

 

Thanks for reading my response.

tjs

 

Bryant Tutas said:

Todd. Read the response. It clearly states that what agents do is NOT considered MARS. This FTC ruling does not apply to us.
Is anyone currently doing this? To be compliant this has to be done before closing:

 

provided a separate written notice from the consumer’s  lender or servicer summarizing the material differences between the consumer’s current mortgage loan and the relief offered;

My concern is most lenders don't provide anything other than an approval.  We are required to get a statement from a lender yet, ARE THE LENDERS REQUIRED TO GIVE IT TO US???

In reading complete rule making history and footnotes, I have not seen any requirements about lenders required to so provide such a "settlement document."  I have a feeling it's up to the negotiator(s) to provide such. Another layer of ......

tjs

Smitty said:

Is anyone currently doing this? To be compliant this has to be done before closing:

 

provided a separate written notice from the consumer’s  lender or servicer summarizing the material differences between the consumer’s current mortgage loan and the relief offered;

 

My concern is most lenders don't provide anything other than an approval.  We are required to get a statement from a lender yet, ARE THE LENDERS REQUIRED TO GIVE IT TO US???

Not sure where my post disappeared to but Bryant, my attorney has confirmed if you do short sale negotiations, you need to be compliant.

Thanks for the reply.  I keep asking why this hasn't been better discussed by NAR, AAR, SAAR, etc.  A lot of Realtors are hanging out right now. 

tjs

Smitty said:

Not sure where my post disappeared to but Bryant, my attorney has confirmed if you do short sale negotiations, you need to be compliant.
Well how can this be enforced?  I am certainly willing to change every other disclosure to the homeowner, because it's in MY control.  How can I be held liable for something I can't control?

Smitty. My attorney is reviewing this now and will be writing an article with his opinion. Sorry but I still disagree that this applies to agents.

I really don't know how the FTC could much clearer than this:

 

"....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."

 

They are stating this because selling the short sale falls under our normal business practices. We are not being compensated to negotiate a short sale. We are being compensated to list and sell the real estate. The short sale negotiations are just part of that licensed activity. Now if we charges extra for our negotiation services then yes I would agree we'd need to follow this rule to the tee.



Smitty said:

Not sure where my post disappeared to but Bryant, my attorney has confirmed if you do short sale negotiations, you need to be compliant.

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