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 FTC’s (Federal Trade Commission) MARS rule (Mortgage Assistance Relief Services) has caused a lot of confusion for licensed real estate agents.

In just the past three weeks I (along with attorneys from The Gore Law Firm) have spoken to two of the largest Keller-Williams & RE/Max offices in the Houston area as well at the Champion School of Real Estate in response to requests for information on how to deal with MARS.

While in previous posts we addressed the questions of:

1. When does the FTC’s MARS rule apply to real estate agents assisting homeowners in a short sale.  READ MORE HERE.
2. Next we addressed the types of disclosure requirements the MARS rule enforces.  READ MORE HERE.
3. Then we reviewed when and how you can be paid for assisting a family trying to sell their home in a short sale.  READ MORE HERE.
4. Finally we discussed the types of “misrepresentations” that can cause an agent/broker to be sued for lack of compliance.  READ MORE HERE.

Let’s address a recent article posted by TAR (Texas Association of REALTORS) Legal Department in regards to MARS.

Titled “How to Navigate MARS” this article in it’s entirety is attached here. –>  MARS article from TAR

Unfortunately the article is VERY brief and doesn’t address some of the most disturbing aspects of the MARS rule. (Such as requirements for recordings phone calls and logging personal email accounts and providing this to the broker.)

Part One – The Ignorant Agent

A quick read makes it sound like “ignorance is bliss”.  If you didn’t know the homeowner needed a short sale in advance and you just did your part in calling the bank to negotiate a short pay that somehow this “should” exclude you from MARS.

The author writes, “Some authorities have opined that this ordinary behavior of a listing broker defines her as a provider subject to the MARS rule. The Texas Association of REALTORS® Legal Department, however, believes that so long as Texas REALTORS® limit their behavior to that demonstrated in the above scenario, they won’t be subject to MARS regulations.”

Really?!??!   Not sure what Edra Anderson’s court room litigation experience resume reads like but this seems like shaky ground.   Most attorneys will tell you ignorance is a not a defense.

I sincerely doubt this argument is going to hold up in court and I’m quite sure that TAR’s Legal Department is not going to spring into action to defend agents who claim, “Hey I didn’t know Sally Seller needed a short sale and I HAD to call the bank 50x to get them to agree to take a short payoff.”

I guess the author ignores this MARS Rule interpretation:

“…the new MARS rule applies to all real estate brokers, agents, 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.”

Part Two – The Short Sale Expert Agent

At least in this section the author gets it right that there are lots of requirements required to stay out of trouble.  Namely items like not collecting money in advance.   If you want to read more go here.

Or what about this:

Under the Rule, when you give a customer an offer of mortgage relief from their lender or servicer, you have additional disclosure requirements:

1. You have to give your customer a separate written page that clearly and prominently says “This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount you disclosed upfront] for our services.”
2. You have to give your customer a separate one-page written notice from the customer’s lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan.

Part Three – Wait…TAR left off this part

What type of monitoring is required to stay in and prove compliance?

You also must take reasonable steps to ensure that your employees and independent contractors (agents) comply with the Rule. At a minimum, this would include:

► Performing random, blind monitoring and recording of sales and customer service calls. This includes and involves your employees/contractors or people who do sales & marketing on your behalf;

► Establishing polices & procedures for receiving and responding to consumer complaints. This includes the procedures for investigating each one promptly and thoroughly;

► Determining the number and nature of consumer complaints related to transactions involving individual employees or contractors. This includes the taking of corrective action – which may include training, discipline, or termination – if they’re not complying with the Rule;

► Keeping records sufficient to establish that you’re meeting your monitoring responsibilities under the Rule. This is best performed by documenting the procedures and scheduling and performingand keeping the results of the “random” and blind monitoring of recorded calls and spot checking employees/contractors for compliance.

Unfortunately the FTC did not take into account that most real estate agents do not sit an office where their phone calls, email, and faxes are automatically logged and recorded to ensure they are in compliance with the stipulations mandated by the MARS rule.  The very nature of the independent contractor status of real estate agents sets the stage for a nearly impossible task for any brokerage to stay in compliance and thus puts that brokerage at extreme risk.

You can read more here – >>>  Proof of Compliance with MARS

Bottom Line:  The FTC MARS rule greatly impacts agents and every brokerage needs to be VERY AWARE of the legal implications of going it alone without legal assistance in negotiating short sales.

You can click here to download the MARS Compliance Guide for Business

– The Bank Slayer

Although the FTC’s claims the new MARS rule is meant to protect homeowners from scammers and incompetents; it also places an enormous number of and frankly burdensome responsibilities on real estate agents/brokers who assist homeowners with short sales or deed in lieu.  Penalties run as high as $11,000 a day thus every agent and broker needs to  fully understand the risks to their business and seek legal counsel if they plan to work short sales apart from an attorney and/or MARS compliant 3rd party.

In previous posts we addressed the questions of:

1. When does the FTC’s MARS rule apply to real estate agents assisting homeowners in a short sale.  READ MORE HERE.
2. Next we addressed the types of disclosure requirements the MARS rule enforces.  READ MORE HERE.
3. Then we reviewed when and how you can be paid for assisting a family trying to sell their home in a short sale.  READ MORE HERE.
4. Finally we discussed the types of “misrepresentations” that can cause an agent/broker to be sued for lack of compliance.  READ MORE HERE.

In this final installment of our MARS rule review we cover the compliance & record-keeping responsibilities that practically and (unfairly) shuts out agents from performing short sales without 3rd party assistance.  But let’s assume for the moment that you as an agent or you as the broker are confident that all materials, disclosures, contract and activity logging is in compliance.  Now the FTC says prove it.

What type of record-keeping is required to prove compliance?

The Rule requires you to keep certain records for at least two years from the date the document is created,  generated, or received:

► Advertising and promotional materials. You must keep a copy of each substantially different advertisement, brochure, telemarketing script, website, training document, or other material related to the advertising or marketing of your service. You don’t have to keep separate copies of documents that have minor, immaterial differences.

► Sales records. You have to keep records showing the name, last known address, and telephone number of each of your customers; the services they bought from you; and how much they paid you. You need to maintain records relating only to customers who agree to use your services.  You don’t have to keep records relating to people who asked about your services, but didn’t sign up.

► Communications with customers. You must keep copies of all written communications between you and customers that occurred before they agreed to use your service.  This includes emails and faxes from employee’s personal accounts or home.

► Agreements with customers. You must keep copies of all contracts or other agreements between you and your customer.

For the detailed oriented and organized agent this is possible but viewed from the brokerage perspective this becomes extremely burdensome.  Especially the fact that the broker is responsible for retrieving, maintaining and storing every written communication including those taking place outside of the brokerage’s main place of business – most agent work remotely and use personal cell phones, email and fax.

What type of monitoring is required to stay in and prove compliance?

You also must take reasonable steps to ensure that your employees and independent contractors (agents) comply with the Rule. At a minimum, this would include:

► Performing random, blind monitoring and recording of sales and customer service calls. This includes and involves your employees/contractors or people who do sales & marketing on your behalf;

► Establishing polices & procedures for receiving and responding to consumer complaints. This includes the procedures for investigating each one promptly and thoroughly;

► Determining the number and nature of consumer complaints related to transactions involving individual employees or contractors. This includes the taking of corrective action – which may include training, discipline, or termination – if they’re not complying with the Rule;

► Keeping records sufficient to establish that you’re meeting your monitoring responsibilities under the Rule. This is best performed by documenting the procedures and scheduling and performing and keeping the results of the “random” and blind monitoring of recorded calls and spot checking employees/contractors for compliance.

Unfortunately the FTC did not take into account that most real estate agents do not sit an office where their phone calls, email, and faxes are automatically logged and recorded to ensure they are in compliance with the stipulations mandated by the MARS rule.  The very nature of the independent contractor status of real estate agents sets the stage for a nearly impossible task for any brokerage to stay in compliance and thus puts that brokerage at extreme risk.

In reiteration of a previous post on :

How should short sales be handled?

As an agent/broker you have four choices when it comes to working with homeowners in a short sale.

1. Stay away from short sales completely.  (Tough considering that 1 out of every 16 listings are are short sales.)
2. List and negotiate the short sale yourself. (Low chance of success due to failure rate of ~73% plus high risk due to new MARS rule.)
3. List but defer short sale negotiation to a 3rd party. (Increased chance of success but referral to 3rd party doesn’t fully release liability under MARS.)
4. List but defer short sale negotiation to a MARS compliant/licensed 3rd party and/or attorney.  (Best chance of success and nearly eliminates MARS liability.)

Bottom line is if you want to negotiate short sales without a 3rd party or attorney you should first have a qualified real estate attorney/firm look over ALL of your correspondence, marketing and forms to make sure everything is in compliance.

- The Bank Slayer

The FTC’s new MARS rule is meant to protect homeowners from scammers and incompetents. Since penalties run as high as $11,000 a day every agent and broker needs to  fully understand the risks to their business.

In previous posts we addressed the questions of:

1. When does the FTC’s MARS rule apply to real estate agents assisting homeowners in a short sale.  READ MORE HERE.
2. Next we addressed the types of disclosure requirements the MARS rule enforces.  READ MORE HERE.
3. Last post we reviewed when and how you can be paid for assisting a family trying to sell their home in a short sale.  READ MORE HERE.

In this article we’ll address how to stay out of trouble by not “over promising”.

THIRD ELEMENT – PERFORMANCE REPRESENTATIONS

“The MARS Rule prohibits mortgage relief companies from making any false or misleading claims about their services, including claims about:

• the likelihood of consumers getting the results they seek (very vague and widely cast);
• the company’s affiliation with government or private entities;
• the consumer’s payment and other mortgage obligations;
• the company’s refund and cancellation policies;
• whether the company has performed the services it promised (need to disclose past performance);
• whether the company will provide legal representation to consumers;
• the availability or cost of any alternative to for-profit mortgage assistance relief services (must provide info about HOPE line, etc.);
• the amount of money a consumer will save by using their services (cost justify why this makes sense for them to pay); or
• the cost of the services.

In addition, the rule bars mortgage relief companies from telling consumers to stop communicating with their lenders or servicers. Companies also must have reliable evidence to back up any claims they make about the benefits, performance, or effectiveness of the services they provide.”

What does this mean?

Unfortunately the MARS rule is very liberal in its definitions; meaning that the government cast a wide net so that if a homeowner complains about the result of an agent’s help (be it a failed short sale that ended in foreclosure or a successful short sale closing resulting in a deficiency judgment) the FTC can pursue and punish the agent/broker.  Furthermore, the homeowner can sue the agent  if he can prove $50,000+ in damages (credit, loss of home, liabilities, deficiency judgment, etc.) due to the “mismanagement” of the short sale due to violations of the MARS rule.

This new federal rule applies to all types of mortgage assistance relief assistance services, including anything having to do with loan modifications AND/OR short sales or Deed-in-Lieu settlements.

How should short sales be handled?

As an agent/broker you have four choices when it comes to working with homeowners in a short sale.

1. Stay away from short sales completely.  (Tough considering that 1 out of every 16 listings are are short sales.)
2. List and negotiate the short sale yourself. (Low chance of success due to failure rate of ~73% plus high risk due to new MARS rule.)
3. List but defer short sale negotiation to a 3rd party. (Increased chance of success but referral to 3rd party doesn’t fully release liability under MARS.)
4. List but defer short sale negotiation to a MARS compliant/licensed 3rd party and/or attorney.  (Best chance of success and nearly eliminates MARS liability.)

Bottom line is if you want to negotiate short sales without a 3rd party or attorney you should first have a qualified real estate attorney/firm look over ALL of your correspondence, marketing and forms to make sure everything is in compliance.

>>>Next up the final component of staying in compliance with MARS and frankly is the most unfair and back breaking of them all.

How does the FTC’s MARS rule affect fees and income from assisting homeowners in a short sale?  In other word, how do you get paid for your hard work?

In previous posts we addressed the questions of:

1. Ddoes the FTC’s MARS rule apply to real estate agents assisting homeowners in a short sale.   The answer is yes.  READ MORE HERE.
2. Then we addressed the types of disclosure requirements the MARS rule enforces.  READ MORE HERE.

SECOND ELEMENT – ADVANCED FEES

“The most significant consumer protection under the FTC’s new rule is the advance fee ban. Under this provision, mortgage relief companies may not collect any fees until they have provided consumers with a written offer from their lender or servicer that the consumer decides is acceptable, and a written document from the lender or servicer describing the key changes to the mortgage that would result if the consumer accepts the offer. The companies also must remind consumers of their right to reject the offer without any charge.”

This is the easiest one for most agent to understand as commissions aren’t paid until the transaction is complete. But plenty of agents have started collecting money in advance of the closing to cover costs such as hiring assistants, inspectors, or appraisers to assist in processing the short sale.  This is forbidden.

When can you get paid?

The Rule says you can’t collect any fee from a customer until you’ve met three requirements:

1. You get an offer of mortgage relief from your customer’s lender or servicer. You must have persuaded your customer’s lender or servicer to reduce, modify, or otherwise change the terms of the customer’s mortgage loan;
2. You give your customer the written offer. You must provide your customer with a written agreement from the lender or servicer to reduce, modify, or otherwise change the terms of the customer’s  mortgage loan; and,
3. Your customer accepts the written offer. The customer’s acceptance must be in the form of an executed written agreement with the lender or servicer that incorporates the changes to the terms of his or her mortgage loan.

What about other services?

You can’t collect any fees for intermediate steps you take as part of the process. For example, it would be illegal to charge separately for:

► conducting an initial consultation with a customer;

► reviewing or auditing a customer’s mortgage or foreclosure documents to detect errors, including robosigning or title problems;

► gathering financial or other information from a customer;

► sending an application for mortgage relief or any other request to a customer’s lender or servicer;

► communicating with a lender or servicer on a customer’s behalf; or

► responding to requests for information from a customer’s lender or servicer.

What needs to be disclosed about my fees?

You must clearly and prominently disclose certain information before you sign people up for your services. You must tell them upfront key information about your services, including:

► the total cost (how your commission is paid),

► that they can stop using your services at any time (yes, the listing agreement must be cancellable),

► that you’re not associated with the government or their lender, and

► that their lender may not agree to change the terms of their mortgage (approve a short sale).

Thanks to Kevin Hardin, esq, Mandelman Matters & The Gore Law Firm for content, insight & analysis.

Next up >>> Performance Misrepresentations

- The Bank Slayer

We have established that brokers/agents assisting homeowners with a short sale do fall under the FTC’s MARS rule:

In fact, the new MARS rule applies to all real estate brokers, agents, 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.  When it says steep penalties we’re talking about up to $11,000 a day!!!

Let’s just say that you, as an agent, and more importantly as a broker, DO NOT want to run afoul of the MARS rule!  To that end let’s examine some key elements.

While the MARS rule has three primary elements (which we will address over the next few articles) one of the most important parts is the need to preserve and retain copies and evidence of compliance for two to five years.

FIRST ELEMENT – DISCLOSURE

Short Sale Negotiators (whether 3rd party or the agent) must now provide significant disclosures in any and all commercial communications issued to homeowners.  For purposes of the rule, “commercial communications” means any written or oral statement, illustration or depiction that is designed to effect a sale or create interest in purchasing any short sale service, plan, or program.  Promotional materials and items and Web pages are included in the term “commercial communication.”

With respect to general commercial communications that occur prior to the consumer agreeing to use a Short Sale Negotiator (and that is not directed at a specific consumer), Short Sale Negotiators must include the following:

(1) “(Name of company) is not associated with the government, and our service is not approved by the government or your lender.”

(2) “Even if you accept this offer and use our service, your lender may not agree to change your loan.”

And there’s more…

When making any commercial communications directed at a specific consumer, the disclosures must also include the following:

“You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services.”

For the purposes of this disclosure, the amount the consumer has to pay consists of the total amount the consumer must pay to purchase, receive, and use all of the mortgage assistance relief services that are the subject of the sales offer including, but not limited to, all fees and charges.  Many Short Sale Negotiators attempt to get paid by the listing broker.  Even if that is the case, a disclosure of that fee must be made.

Let’s examine specific situations and the impact by these required disclosures.

1. Every type of conversation or marketing is covered. All written (letter, email, car magnet, etc.) as well as all oral statements such as: “I’ve closed 5 short sales like yours in the last year,” or “RE/MAX sells more real estate than any other brand and that includes short sales,” or “Keller-Williams trains agents like myself how to get tough short sales done.  I can yours done,” etc. etc. are required to be discounted with the above language and disclaimers.
2. Listing agreements are no longer sacred. You must provide the following new additions: a) the seller can cancel at anytime; b) that you’re not associated with the government or lender; c) that their lender may not agree to change the terms of the loan thereby permitting the short sale; d) the total cost.
3. You better get a finance degree.  You must disclose the differences between their loan and the short sale offer/approval.  Frankly, this is going to be the toughest for most agents.  No longer can you just “get it approved” without a detailed explanation of the “new loan terms.”  For example, an agent must explain in detail ALL material differences between their current loan versus taking the short sale approval and closing the transaction.  Items such as how much of an a deficiency will remain, how much the mortgage insurance company can or will pursue, and what is the remaining balance and the terms for re-payment if the short sale approval includes a promissory note.

Truth In Lending on Steroids

Under the Rule, it’s illegal to misrepresent, either expressly or by implication, any “material aspect” of your services.   That includes any information that’s likely to affect a consumer’s decision to use your service or choose one service over another.

Here are some examples of claims that would be material:

• the likelihood of negotiating, getting, or arranging a specific form of mortgage relief (like a short sale)
• how long it will take to get the advertised mortgage relief;
• an affiliation with the government, public programs, or lenders or servicers;
• the terms and conditions of homeowners’ mortgages including how much they currently have to pay;
• your refund and cancellation policies;
• whether homeowners will be getting legal services;
• the benefits and costs of using alternatives to for-profit MARS providers;
• the amount homeowners may save if they use your service;
• the total cost of your service; and
• the terms, conditions, or limitations of a lender or servicer’s offer of mortgage relief, including how much time the homeowner has to accept the offer.

In addition, if you make claims about the benefits, performance, or efficacy of your services, your statements must be truthful and you must have competent and reliable evidence to back them up.

So, for example, if you make claims about how good you are at closing short sales but the reality is you have lost 50% of the past listings to foreclosure, or that your previous closed short sale left the homeowner on the hook for a deficiency judgment, this must be disclosed, or at least addressed.

Short Sale offer/approval requires more disclosures

Under the Rule, when you give a customer an offer of mortgage relief from their lender or servicer, you have additional disclosure requirements:

1. You have to give your customer a separate written page that clearly and prominently says “This is an offer of mortgage assistance we obtained from your lender [or servicer]. You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount you disclosed upfront] for our services.”
2. You have to give your customer a separate one-page written notice from the customer’s lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan. Some examples of differences in loan terms that would be material to customers – and would have to be disclosed – include:

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

Looks like Loan Mods R Us and other scammers (and even some legitimate companies) will be going bye-bye.  FINALLY!!

Highlight are:

We have been saying this for quite some time.  If you want your loan modified then you need a lawyer.  Real lawyers.  With real litigation experience.  With wins versus the big banks.

- The Bank Slayer

www.washingtonpost.com

By Kenneth R. Harney

You’ve probably seen the pitches on TV and the Internet or found them stuffed in your mailbox: official-looking communications complete with logos and letterheads that look vaguely like those used by the Treasury, Internal Revenue Service and other federal agencies.

The promoters have names that resemble those of well-known, legitimate federal foreclosure-intervention programs such as Making Home Affordable or Home Affordable Modification. Some even use photos of President Obama or the Great Seal of the United States.

They are instead criminal enterprises posing as do-gooders who promise to get you out of the mortgage jam you’re in, whether you’re severely delinquent or deeply underwater. They claim they can persuade your lender to cut your monthly payments, forgive all penalties, slash your interest rate and even get your loan balance reduced. If your lender won’t cooperate, they say, they will perform “forensic audits” on your mortgage and persuade a court to cancel your loan transaction because of technical mistakes in the paperwork.

Bogus firms always insist on getting your money upfront – often thousands of dollars – and then do little or nothing. But now the Federal Trade Commission is cutting off the main fuel supply for mortgage-modification scammers. Under new rules outlined on Nov. 19, the agency plans to ban virtually all upfront payments, institute mandatory disclosure rules and clamp new federal restrictions on lawyers who participate in mortgage-modification schemes.

Under these rules, companies offering mortgage relief will have to contact your lender or servicer and present you with a written proposal describing the key changes to your mortgage terms that the note holder is willing to make before any money can be collected in advance.

Modification companies also will be required to make clear that they have no connection to any government agency or program, and that customers are free to reject any offer from the lender, with no requirement to pay a fee.

The rule also prohibits modification firms from using one of their most common and destructive ploys: instructing clients to stop communicating with their lender or servicer. Many scammers not only urge unwary consumers to let them handle all negotiations but also direct them to stop sending in payments – or worse, tell them to send all payments to a modification company. Typically that has the effect of rendering any ultimate modification with the lender or servicer even less likely.

The FTC estimates that bogus modification companies have stolen millions from unwary homeowners in the past two years. Ironically, there has been a huge increase in the number of abusive schemes in the wake of the federal government’s efforts to create legitimate foreclosure-relief programs. The FTC has brought more than 30 cases against these operations, but until now the agency has had no way to control the pervasive advance-fee requirements that cost consumers so much.

Now, when that portion of the new rule takes effect on Jan. 31, the FTC will be able to proceed against any firm that collects upfront fees without obtaining the required written proposals at no charge from lenders. It will be a litmus test: If a firm seeks to charge anything or collects money upfront, it will be in violation of federal law and subject to harsh civil penalties.

The only exception will be for lawyers, who typically require retainers before they begin negotiating on a client’s behalf. They will be permitted to collect retainer fees for modification efforts but only if they deposit the money into “client trust accounts” under state bar regulations. Lawyers who charge advance fees also must be licensed by state authorities and be in compliance with state laws and regulations governing professional conduct.

Joel Winston, the FTC’s associate director of financial practices and a lawyer himself, said in an interview that “a disappointingly high percentage of fraudsters [in FTC loan-modification cases] have been lawyers – they’re just fraudsters with law degrees.” Nonetheless, Winston said, the agency recognizes that “legitimate practitioners” can play a valuable role in negotiating modifications for consumers, and the FTC doesn’t want to cut this off by banning upfront retainer payments outright.

Some states, such as California, have moved against lawyers running loan-mod scams, he said, but once the new FTC rule takes effect nationwide, every state will get “federal teeth” behind their efforts to crack down on law firms that abuse homeowners in mortgage trouble.

“You won’t be able to fly under the radar anymore hoping that state disciplinary boards won’t spot you,” Winston said. “Now [fraudster lawyers] are going to have the federal government to contend with – and we will be looking for them.”



BAC Home Loan Servicing and Countrywide are just plain crooks.  While there is nothing wrong with a lender taking control of a situation with an abandoned home (per the powers granted to them in your deed of trust/mortgage that you signed at closing) the rampant mark up of fees and side dealings like this have been out of control for awhile.

While auditing files, we’ve seen a BPO (broker price opinion) charged to the same house 17 times in 20 days.  Give me a break!  Like the bank really sent an agent out to the house 17 times.  It is very clear when you audit a mortgage that many times the servicers are jacking the homeowner up with fees to line the bank’s pockets.

If Bank of America is your servicer you need to closely watch you account if you are struggling with your payments.

If you are a Countrywide customer prior to 2008 you need to have your mortgage audited immediately.

The FTC press release is below.

- The Bank Slayer

Countrywide Will Pay $108 Million for Overcharging Struggling Homeowners; Loan Servicer Inflated Fees, Mishandled Loans of Borrowers in Bankruptcy

Two Countrywide mortgage servicing companies will pay $108 million to settle Federal Trade Commission charges that they collected excessive fees from cash-strapped borrowers who were struggling to keep their homes. The $108 million represents one of the largest judgments imposed in an FTC case, and the largest mortgage servicing case. It will be used to reimburse overcharged homeowners whose loans were serviced by Countrywide before it was acquired by Bank of America in July 2008.

“Life is hard enough for homeowners who are having trouble paying their mortgage. To have a major loan servicer like Countrywide piling on illegal and excessive fees is indefensible,” said FTC Chairman Jon Leibowitz. “We’re very pleased that homeowners will be reimbursed as a result of our settlement.”

According to the complaint filed by the FTC, Countrywide’s loan-servicing operation deceived homeowners who were behind on their mortgage payments into paying inflated fees – fees that could add up to hundreds or even thousands of dollars. Many of the homeowners had taken out loans originated or funded by Countrywide’s lending arm, including subprime or “nontraditional” mortgages such as payment option adjustable rate mortgages, interest-only mortgages, and loans made with little or no income or asset documentation, the complaint states.

Mortgage servicers are responsible for the day-to-day management of homeowners’ mortgage loans, including collecting and crediting monthly loan payments. Homeowners cannot choose their mortgage servicer. In March 2008, before being acquired by Bank of America, Countrywide was ranked as the top mortgage servicer in the United States, with a balance of more than $1.4 trillion in its servicing portfolio.

When homeowners fell behind on their payments and were in default on their loans, Countrywide ordered property inspections, lawn mowing, and other services meant to protect the lender’s interest in the property, according to the FTC complaint. But rather than simply hire third-party vendors to perform the services, Countrywide created subsidiaries to hire the vendors. The subsidiaries marked up the price of the services charged by the vendors – often by 100% or more – and Countrywide then charged the homeowners the marked-up fees. The complaint alleges that the company’s strategy was to increase profits from default-related service fees in bad economic times. As a result, even as the mortgage market collapsed and more homeowners fell into delinquency, Countrywide earned substantial profits by funneling default-related services through subsidiaries that it created solely to generate revenue.

According to the FTC, under most mortgage contracts, homeowners must pay for necessary default-related services, but mortgage servicers may not mark up the cost to make a profit or charge homeowners for services that are not reasonable or appropriate to protect the mortgage holder’s interest in the property. Homeowners do not have any choice in who performs default-related services or the cost of those services, and they have no option to shop for those services.

In addition, in servicing loans for borrowers trying to save their homes in Chapter 13 bankruptcy proceedings, the complaint charges that Countrywide made false or unsupported claims to borrowers about amounts owed or the status of their loans. Countrywide also failed to tell borrowers in bankruptcy when new fees and escrow charges were being added to their loan accounts. The FTC alleges that after the bankruptcy case closed and borrowers no longer had bankruptcy court protection, Countrywide unfairly tried to collect those amounts, including in some cases via foreclosure.

Settlement Terms

The FTC’s complaint and settlement order name two mortgage servicers as defendants: Countrywide Home Loans, Inc. and BAC Home Loans Servicing LP, formerly doing business as Countrywide Home Loans Servicing LP. The settlement requires Countrywide to pay $108 million, which will be refunded to homeowners who Countrywide overcharged before July 2008.

In addition, the settlement order prohibits Countrywide from taking advantage of borrowers who have fallen behind on their payments. The defendants continue to service millions of mortgage loans, including tens of thousands of loans involving borrowers in bankruptcy and foreclosure. In the servicing of loans, the defendants are permanently barred from:

• Making false or unsubstantiated representations about loan accounts, such as amounts owed.
• Charging any fee for a service unless it is authorized by the loan instruments, by law, or by the consumer for a specific service requested by the consumer.
• Charging any fee for a default-related service unless it is a reasonable fee charged by a third party for work actually performed. If the service is provided by an affiliate of a defendant, the fee must be within limits set by state law, investor guidelines, and market rates. Defendants must obtain annual, independent market reviews of their affiliates’ fees to ensure that they are not excessive.

In addition, Countrywide must advise consumers if it intends to use affiliates for default-related services and, if so, provide a fee schedule of the amounts charged by the affiliates.

The settlement also requires Countrywide to make significant changes to its bankruptcy servicing practices. For example, Countrywide must send borrowers in Chapter 13 bankruptcy a monthly notice with information about what amounts the borrower owes – including any fees assessed during the prior month. The defendants also must implement a data integrity program to ensure the accuracy and completeness of the data they use to service loans in Chapter 13 bankruptcy.

This case was brought with the invaluable assistance of the United States Trustee Program, the component of the Department of Justice that oversees the administration of bankruptcy cases and private trustees. This action represents the FTC’s continuing work to help consumers who have been hurt by the economic downturn.

For more information about the case and the FTC’s refund program, see www.ftc.gov/countrywide.

The Commission vote to authorize staff to file the complaint and settlement was 5-0. The complaint and settlement were filed in the U.S. District Court for the Central District of California.

The Federal Trade Commission is a member of the interagency Financial Fraud Enforcement Task Force. For more information on the Task Force, visit www.stopfraud.gov.

NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendants have actually violated the law. Stipulated court orders are for settlement purposes only and do not necessarily constitute an admission by the defendants of a law violation. Stipulated orders have the full force of law when signed by the judge.

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 1,800 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.