Read the fine print!  Although the FTC has agreed to forbear enforcing some provisions of MARS against REALTORS, this doesn’t mean that real estate agents are completely off the hook.

What it does mean is that some of the more onerous and ridiculous record-keeping and disclosures requirements will not be pursued as violations…that is unless you don’t pay your dues and or forget to do continuing education.

In reality, the real “gotcha” is focused on representations.

In other words what you tell or represent to the homeowner or others.  Here are some of the exact types of “mis”-representation (straight from FTC) with examples alongside :

1. The likelihood of negotiating, obtaining, or arranging a specific form of mortgage relief;  (A short sale will save you from foreclosure.)
2. The amount of time needed to obtain the promised mortgage relief; (If I can get an offer into the bank before the foreclosure sale date we should be OK.)
3. The affiliation of the provider with the government, public programs, or consumers’ lenders or servicers; (The bank pays us to get you out of trouble.)
4. Consumers’ payment obligations under their mortgage loans; (A short sale will “settle” your debt and save your credit.)
5. The terms or conditions of consumers’ mortgage loans; and (After the short sale you won’t owe the bank anymore.)
6. The amount or percentage of debts that consumers may save by purchasing MARS. (Hiring me will get you a higher offer and make it easier to settle your short sale.)

As you can see some of these are typical statements agents could make in the course of closing a short sale.  Be very careful what you say.

The FTC recommends you use phrases such as this uplifting gem.

“In fact, consumers who stop making payments may incur additional fees and charges and lose their homes, regardless of whether they have retained a MARS provider. ”

Bottom line is make sure that you stick to activities that are standard to being a real estate agent – don’t interpret documents like the short sale agreement or play lawyer.

The FTC press release is below.

- The Bank Slayer

FTC Will Not Enforce Provisions of MARS Rule Against Real Estate Professionals Helping Consumers Obtain Short Sales

The Federal Trade Commission today issued a statement announcing that it will forbear from enforcing most provisions of its Mortgage Assistance Relief Services (MARS) Rule against real estate brokers and their agents who assist financially distressed consumers in obtaining short sales from their lenders or servicers.

As a result of the stay on enforcement, these real estate professionals will not have to make several disclosures required by the Rule that, in the context of assisting with short sales, could be misleading or confuse consumers. As more and more American homeowners seek short sales, it is especially important that the Rule not inadvertently discourage real estate professionals from helping consumers with these types of transactions.

The MARS Rule was issued pursuant to authority granted by Congress in 2009. The issuance of the Rule followed numerous FTC and state enforcement actions against companies that claimed to be able to obtain from consumers’ mortgage lenders or servicers a loan modification or other relief to avoid foreclosure. The Rule covers companies or individuals, among others, who assist consumers in obtaining approval of a short sale from their lender or servicer.

A short sale occurs when a home is sold for an amount less than the balance owed on the mortgage loan, and the lender or servicer agrees to accept the proceeds of the sale instead of pursuing foreclosure. Short sales can benefit consumers by allowing them to escape from a mortgage that they cannot afford, while avoiding foreclosure. Many real estate professionals assist distressed homeowners by providing both traditional services associated with selling their homes (e.g., listing the property) and working to seek lender or servicer approval of a short sale.
The MARS Rule requires companies offering mortgage assistance relief services to disclose certain information to consumers about the services they provide, bans collection of advance fees, and prohibits false or misleading claims. After the Rule went into effect, a number of real estate professionals who help consumers with short sales raised concerns about complying with the Rule. These professionals pointed out that some of the required disclosures could confuse consumers or could be inaccurate in this context.

At this time, the Commission has announced that it will not enforce most of the provisions of the MARS Rule against real estate professionals who are engaged in obtaining short sales for consumers. The stay applies only to real estate professionals who: 1) are licensed and in good standing under state licensing requirements; 2) comply with state laws governing the practices of real estate professionals; and 3) assist or attempt to assist consumers in obtaining short sales in the course of securing the sales of their homes. The stay exempts real estate professionals who meet these requirements from the obligation to make disclosures and from the ban on collecting advance fees. These professionals, however, remain subject to the Rule’s ban on misrepresentations.

The Commission stated that the stay does not apply to real estate professionals who provide other types of mortgage assistance relief, such as loan modifications. In addition, the FTC will continue to enforce the Rule and Section 5 of the FTC Act, which prohibits unfair and deceptive practices, against all other providers of mortgage assistance relief services.

The Commission vote approving the MARS Rule enforcement policy was 5-0. It can be found on the FTC’s website and as a link to this press release. More information about the Rule can be found here, and information about consumers’ mortgage rights can be found here.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 2,000 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s website provides free information on a variety of consumer topics. Like the FTC on Facebook and follow us on Twitter.

MEDIA CONTACT:

Mitchell J. Katz, Office of Public Affairs 202-326-2161

STAFF CONTACT:

Evan Zullow or Leah Frazier, Bureau of Consumer Protection 202-326-3224

In fact, consumers who
stop making payments may incur
additional fees and charges and lose
their homes, regardless of whether they
have retained a MARS provider. The
purported benefit of immunity from
foreclosure is material to consumers’
decisions to purchase MARS and
whether to continue making payments
on their mortgages.

The quick answer is yes, REALTORS® as well as anyone else is involved in short sales or other “pre-foreclosure” activities are subject to the MARS Rule.

Although the FTC’s MARS Rule took effect on January 31, 2011, most real estate brokers have little or no knowledge regarding the impact on their practice.

Why hasn’t someone told me about MARS?

Most publications only recently have had a chance to read through and analyze the MARS Rule.  Not only is the Rule 15 pages long in semi-legalese; the actual “law” as added to the Federal Register 16 CFR Part 322 Mortgage Assistance Relief Services; Final Rule is 51 pages plus another 160 pages of explanation and history.  In other words, government work at its finest.

Additionally, the most ardent and traditional supporters for REALTORS® are local trade associations such as TAR and HAR or the name brand franchisors such as Century 21, Coldwell Banker, EXIT, Kellar-Williams, Prudential, RE/Max and others.  But HAR & TAR have no answer for federal mandates pushed through the Federal Trade Commission and the national chains are scrambling to advise their local offices when the fact of the matter is this should have been headed off by NAR.

Has NAR stepped up to protect REALTORS®?

No, the National Association of REALTORS® (NAR) failed to get their members excluded from the MARS Rule.   Although NAR did comment on the Rule, the FTC specifically addressed real estate agents thereby making them subject to the Rule.  Bottom line is that no group even as powerful as NAR wanted to argue with the FTC over this issue.

When is a REALTOR® specifically subject to the MARS rule?

Good news: The intent was to avoid including real estate brokers and agents handling sales of real property and thus the new MARS rule does not apply to real estate brokers (and their agents), provided they provide only real estate brokerage services to their clients (e.g. listing, showing, negotiating the transaction with the buyer).

Bad News: The new MARS rule does apply to real estate brokers (and their agents) (as well as title officers, etc.) who attempt to negotiate or otherwise provide services and/or endeavor in efforts related to halting a foreclosure or obtaining lender or servicer approval of a short sale.  The penalties are steep and more than just your entire commission is at risk if you step over the line.

Is everyone subject to the MARS Rule?

The quick answer – Yes.  But in general, the rule exempts attorneys if:

1. They provide mortgage assistance relief services as part of the practice of law.
2. They are licensed in the state where the consumer or dwelling is located.
3. They comply with state laws and regulations governing attorney conduct related to the rule

>> Up next: What disclosures are required when doing a short sale —>  Go Here

- The Bank Slayer

Homeowners take note!  Stop sending your hard earned money to those out-of-state, pretender lawyers or loan mod gurus that claim to get you a loan modification or short sale.

Not only are most of these companies scams but now most of them are in violation of the Federal Trade Commission’s (FTC) new Mortgage Assistance Relief Services (or MARS) Rule which went into affect on January 31, 2011.  (If you already paid someone upfront in the past you’re out of luck – hopefully it works out.  If not call us for tips and suggestions.)

Note:  Attorneys are generally exempt from the rule if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must also place any advance fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

I will add my personal “attorney” qualifications:

1. They must have a real office and a real law practice.  Don’t risk your financial future on some part-timer.
2. They must have sued your bank or mortgage company.  Don’t be the trial & error case for a first timer.
   
3. They should suggest more than one option.  Bankruptcy is not the only solution, in fact it rarely is the first or best.
4. They must have access to forensic audits.  A forensic audit by itself is worthless.  In the hands of a knowledgeable attorney, powerful.
   

The press release from the FTC is below.

- The Bank Slayer

FTC’s Mortgage Assistance Relief Services Advance Fee Ban Takes Effect

02/10/2011

The advance fee ban under the FTC’s Mortgage Assistance Relief Services (MARS) Rule is designed to protect financially distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis.

“Banning the collection of up-front fees will protect homeowners from being victimized,” FTC Chairman Jon Leibowitz said. “This is especially important at a time when so many people are behind on their mortgages or facing foreclosure.”

As of January 31, 2011, companies that offer to help homeowners get their loans modified or sell them other types of mortgage assistance relief services are no longer allowed to charge up-front fees. Under the rule, a mortgage assistance relief company may not collect a fee until the consumer has signed a written agreement with the lender that includes the relief obtained by the company. When the company presents the consumer with that relief, it must inform the consumer, in writing, that the consumer can reject the offer without obligation and, if the consumer accepts, the total fee due. Before the consumer agrees to accept the mortgage relief, the company must also provide a written notice from the lender or servicer showing how the relief will change the terms of the consumer’s loan (including any limitations on a trial loan modification).

During the past three years, the FTC has filed 32 lawsuits against mortgage assistance relief companies for deception and abuse, and state law enforcers have filed hundreds of additional cases. The MARS Rule issued in November gives the FTC and the states an additional tool for combating deceptive and unfair acts or practices by these entities.

Attorney exemption

Attorneys are generally exempt from the rule if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must also place any advance fees they collect in a client trust account and abide by state laws and regulations covering such accounts.

http://www.ftc.gov/opa/2011/02/mars.shtm

Can’t you just see the ads?

Anyone can now be a foreclosure expert!  No experience, license or training required.  Yes, you can make money at home (or in an office) with a full time job working for a bank!!

Only requirements for this job are sight and upper limbs, so you can see where to place signatures and the ability to use a pen and/or stamp.    Better than stuffing envelopes, this job allows you to make money every thirty to sixty seconds simply stamping and signing papers!   Apply today and start working tonight!

Robo-signers were initially thought to be limited to a few dozen rogue bank and/or foreclosure mill folks.  At least that is what the banks wanted everyone to believe.  Guess what?  It ain’t true.

Hundreds, maybe thousands of folks across the country have found employment as robo-signers.  Attorney’s representing homeowners across the country are digging deeper and deeper with depositions of signers and finding out as an AP story that came out today (can be found here) :

…the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

Many Americans think this whole robo-signer deal is nothing more than failure to cross a few t’s and dot some i’s.  But the legal implications are serious.  Swearing that you have actually read and verified the facts in a document, when you have not, is a legal offense.

The real issue though is who actually owns the underlying debt represented by the mortgage!

Why?  How about innocent folks being foreclosed on by accident?  It’s happening (look here).

Further, we have had three peple come into our office in the last 30 days who are CURRENT with their payments and one who is AHEAD, (yes paying extra) and have either been threatened with foreclosures and in the case of the person who is ahead was foreclosed upon!

We have folks that are in the process of either being reviewed for HAMP or have actually received a loan modification and are being foreclosed by the new alleged debt owner.

Want an example?  We have one client that did a short sale three years ago settling a first and second lien; but now a new alleged debt owner of the 2nd lien claims money is still owed.  Something along the lines of they didn’t get the money from the servicer who approved the short sale – three years ago!!!   Hear that?

The previous servicer, Fremont, who is long gone supposedly never sent the money onto the owner of the debt?  Is it true?  Who knows at this stage but the new owner of the home now has a new servicer, Litton trying to make a claim on the old second lien AND the past homeowner, who short sold the house, has their credit being hammered for a debt already settled.

The rush to foreclose homes by using robo-signers impacts not just those who deserve to be foreclosed but those that don’t. Why?  Because robo-signers as these depositions have shown:

…barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

I feel sorry for the buyer of a foreclosed property that expects to close and move into or fix it up and is being held up by banks like Chase or Bank of America as they examine the foreclosure signing disaster. I feel sorry for title companies employees and others that are being hurt by this mess but it needs to be fixed.

The title to one’s home must be clean or it hurts everyone involved in the sale or purchase of a home.

People should not be allowed to live for free on the back of someone to whom they owe a debt but if either the debt is NOT owed (current or been paid off) or the wrong creditor is trying to collect it must be stopped.

The AP story is below.

– The Bank Slayer – see our list of short sale homes were currently working on.

Robo-signers: Mortgage experience not necessary

By MICHELLE CONLIN AP Real Estate Writer © 2010 The Associated Press

Oct. 13, 2010, 12:28AM

NEW YORK — In an effort to rush through thousands of home foreclosures since 2007, financial institutions and their mortgage servicing departments hired hair stylists, Walmart floor workers and people who had worked on assembly lines and installed them in “foreclosure expert” jobs with no formal training, a Florida lawyer says.

In depositions released Tuesday, many of those workers testified that they barely knew what a mortgage was. Some couldn’t define the word “affidavit.” Others didn’t know what a complaint was, or even what was meant by personal property. Most troubling, several said they knew they were lying when they signed the foreclosure affidavits and that they agreed with the defense lawyers’ accusations about document fraud.

“The mortgage servicers hired people who would never question authority,” said Peter Ticktin, a Deerfield Beach, Fla., lawyer who is defending 3,000 homeowners in foreclosure cases. As part of his work, Ticktin gathered 150 depositions from bank employees who say they signed foreclosure affidavits without reviewing the documents or ever laying eyes on them — earning them the name “robo-signers.”

The deposed employees worked for the mortgage service divisions of banks such as Bank of America and JP Morgan Chase, as well as for mortgage servicers like Litton Loan Servicing, a division of Goldman Sachs.

Ticktin said he would make the testimony available to state and federal agencies that are investigating financial institutions for allegations of possible mortgage fraud. This comes on the eve of an expected announcement Wednesday from 40 state attorneys general that they will launch a collective probe into the mortgage industry.

“This was an industrywide scheme designed to defraud homeowners,” Ticktin said.

The depositions paint a surreal picture of foreclosure experts who didn’t understand even the most elementary aspects of the mortgage or foreclosure process — even though they were entrusted as the records custodians of homeowners’ loans. In one deposition taken in Houston, a foreclosure supervisor with Litton Loan couldn’t define basic terms like promissory note, mortgagee, lien, receiver, jurisdiction, circuit court, plaintiff’s assignor or defendant. She testified that she didn’t know why a spouse might claim interest in a property, what the required conditions were for a bank to foreclose or who the holder of the mortgage note was. “I don’t know the ins and outs of the loan, I just sign documents,” she said at one point.

Until now, only a handful of depositions from robo-signers have come to light. But the sheer volume of the new depositions will make it more difficult for financial institutions to argue that robo-signing was an aberrant practice in a handful of rogue back offices.

Judges are unlikely to look favorably on a bank that claims paperwork flaws don’t matter because the borrower was in default on the loan, said Kendall Coffey, a former Miami U.S. attorney and author of the book “Foreclosures.”

“There has to be a cornerstone of integrity to the process,” Coffey said.

Bank of America responded to Tiktin’s depositions by re-affirming that an internal review has shown that its foreclosures have been accurate. “This review will ensure we have a full understanding of any potential issues and quickly address them,” Bank of America spokesman Dan Frahm said. Frahm added that, on average, the bank’s foreclosure customers have not made a payment in more than 18 months.

JP Morgan Chase spokesman Thomas Kelly said the bank has requested that courts not enter into any judgments until the bank had reviewed its procedures. But Kelly added that the bank believes that all the underlying facts of the cases involved in the document fraud allegations are true.

Litton Loan Servicing did not respond to a request for comment.

Even before the foreclosure scandal broke, the housing market was in the midst of an ugly detoxification. Now the escalating crisis is likely to prolong the housing depression for at least another few years. The allegations are opening the entire chain of foreclosure proceedings to legal challenge. Some foreclosures could be overturned. Others could be deemed illegal.

For a housing recovery to occur, all the foreclosed properties — which could account for 40 percent of all residential sales by 2012 — need to be re-scrutinized by the banks and resold on the market. Now, with so much inventory under a legal threat, the process will become severely delayed.

“This just adds more uncertainty to the whole mortgage process, so buyers are asking themselves: do I want to buy a home in this environment?” says Cris deRitis, director of credit analytics at Moody’s Analytics. “We need to fix these issues before the economy can recover.”

Though some have chalked up the foreclosure debacle to an overblown case of paperwork bungling, the underlying legal issues are far more serious. Yes, swearing that you’ve reviewed documents you’ve never seen is a legal offense. But at the center of the foreclosure scandal looms something much larger: the question of who actually owns the loans and who has the right to foreclose upon them. The paperwork issues being raised by lawyers and attorneys generals have the potential to blight not just the titles of foreclosed properties but also those belonging to homeowners who have never missed a mortgage payment.

So far, JP Morgan Chase, PNC Financial and Litton Loan Servicing have stopped some foreclosure proceedings in 23 states. Bank of America and GMAC, recently renamed Ally, have extended their moratoriums to all 50 states. Wells Fargo and Citigroup have said they are continuing with foreclosures, adding that they are confident in their documents and processes.

But Citigroup has now backpedaled some on that assertion. The bank sent out a press release Tuesday that it was no longer using the law firm of “foreclosure king” David Stern, now under investigation by the Florida attorney general’s office. “Pending the outcome of the AG’s investigation, Citi is not referring new matters to this firm,” the bank said in an e-mailed statement.

Late last week, in an interview with the Florida attorney general, a former senior paralegal in Stern’s firm described a boiler-room atmosphere in which employees were pressured to forge signatures, backdate documents, swap Social Security numbers, inflate billings and pass around notary stamps as if they were salt.

Stern’s lawyer, Jeffrey Tew, did not respond to a request for comment.

Meanwhile, the public outrage continues to mount. In what is perhaps a sign of things to come, a Simi Valley, Calif., couple and their nine children broke into their foreclosed home over the weekend and moved back in, according to television station KABC of Simi Valley. The couple, Jim and Danielle Earl, say they were working with the bank to catch up on payments until they discovered a $25,000 difference between what they owed and what the bank said they owed. The family was evicted from their Spanish-style two-story in July. The home has been sold, and the new owner was due to move in soon.

The Earls and their attorney now allege that they were victims of fraudulent paperwork.

___

Curt Anderson contributed from Miami.

This is not a joke.  Realtors who think they are now “Short Sale Specialist” or “Loan Modification Specialist” are running a huge risk by trying to navigate in dangerous water and practicing in areas for which they lack training and more importantly don’t  have a license.

If you are taking short-sale listings, you’d better darn well know what you are doing!  If you don’t have the necessary training or experience, don’t just assume you can handle it.  You have a FIDUCIARY OBLIGATION to your clients to either bring someone in who knows what they are doing or refer them out to someone who does.

Remember, you cannot earn a commission on a house that goes to foreclosure.  Worse then earning no money is getting sued and then paying.

- The Bank Slayer

Below is a good article posted by Tori Stamps, MA, JD (a Broker in TN).

Realtor Lawsuits – The Other Side of the Coin…

I just read a featured blog by Walter Hayes called “Realtor Lawsuits” and have to say I was shocked by the comments.

Walter’s blog stated he’s heard “homeowners who have lost their homes to foreclosure are coming after agents and suing because their home didn’t sell and ended up being foreclosed on.”

The vast amount of comments basically said “What?!?  Those scummy lawyers?” Instead of looking at the possible validity of the argument, these agents are tossing blame to the attorneys.

The truth of the matter is that too many agents are practicing outside of their area of expertise!  Agents who have never been trained, and have no experience in what it takes to get a short sale to the table are taking these listings (because they need the commission) instead of referring them to agents who know what they are doing.  They list the property like any other and hope for the best (instead of contacting the bank on a daily (or more) basis working through the issues.)

I understand the desperation of agents out there right now.  Times are tough.  Really tough!  But, taking a listing outside of your level of experience and scope of normal practice, is not going to help.  Not only are you setting up your client to LOSE THEIR HOME (that should be bad enough!), but you are also setting yourself for a lawsuit!

AND - YOU WILL LOSE!

Short sales are a VERY labor intensive listing that require a VERY experienced agent.  While I’m an SFR (BFD, I took a class), I still bring in an agent who has A LOT more experience in short sales (from a different company, no less) because that’s what my clients NEED!  The Code of Ethics is VERY specific here - and it’s not hard to understand!

Article 11
…
REALTORS^® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service…

If you are taking short-sale listings, you’d better darn well know what you are doing!  If you don’t have the necessary training or experience, don’t just assume you can handle it.  You have a FIDUCIARY OBLIGATION to your clients to either bring someone in who knows what they are doing or refer them out to someone who does.

Sometimes acting responsibly means you don’t get a commission.  And THAT’S O.K.  That’s what Fiduciary obligation means!  To put your clients well being above your own!

From Wikipedia.org…

“A fiduciary is someone who has undertaken to act for and on behalf of another in a particular matter in circumstances which give rise to a relationship of trust and confidence.”

A fiduciary duty is the highest standard of at either equity or law. A fiduciary (abbreviation fid) is expected to be extremely loyal to the person to whom he owes the duty (the “principal”):he must not put his personal interests before the duty, and must not profit from his position as a fiduciary, unless the principal consents.

If you’re a REALTOR helping a seller whose is facing a foreclosure situation in Texas AND they have a home equity loan or cash out refinance you can leverage the Texas Constitution to buy you time.

But you need to takes steps immediately when the seller receives the customary “You Have Been Sued” letters.  But what does this mean and what do you do?

First thing to tell the seller:  Open all your mail.  All of it.  Every time.  Go and pick up EVERY green card mailed to you.  Certified mail which is not picked up has the same effect as not picking it up; but you just don’t know what it said.

Second, call someone like us immediately to connect your seller with an attorney.  Even if they are broke and don’t have two nickels to rub together.  Why? Because proactive steps can be taken to kick the lender back to the curb and buy your seller another 3-4 months before the foreclosure sale date.  Simple and straight forward filings by a competent attorney can really put the mortgage company on their heels.

Third, if you don’t have an offer, start lowering the price to secure one ASAP.  Time is working against you and many mortgage companies are talking 30-45 days until they can even review an offer.

Fourth, don’t let your seller represent themselves in court for the “suit.”  The mortgage companies are too sophisticated and will crush your seller.  A rock solid foreclosure specialist attorney will know how to get the mortgage company to pick up most of the tab for your seller.

Fifth and finally, the popular “Produce The Note” strategy will likely be tried by your seller and it can be very effective…sadly it will fall on deaf ears if not presented the right way.  They need good reliable information to buy the most time and eventually bring the lender to the table to cut a deal to close out your short sale.

-          The Bank Slayer