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.

NAR is touting a new bill the “Prompt Decision for Qualification for Short Sale Act of 2011” which has been introduced in the U.S. House of Representative and will mandate that mortgage servicers respond to short sale requests within 45 days!

Sounds good but guess what? They already tried this once.  It was called Prompt Decision for Qualification for Short Sale Act of 201o. It never made it out of committee.

You think to yourself, “But hey, at least they are trying again.”   (You can track the progress of the 2011 attempt here:  http://www.govtrack.us/congress/bill.xpd?bill=h112-1498 )

But the real problem is that the bill is virtually worthless.  Why?

First, it provides exceptions – meaning it doesn’t apply – for most mortgages.

Example #1 – It doesn’t apply to any loan that has been securitized. – READ: Fannie or Freddie Loans. This covers over 50% of all mortgages in the U.S.

…except as provided in subsection (b) and notwithstanding any other provision of law or of any contract, including a contract between a servicer of a residential mortgage loan and a securitization vehicle or other investment vehicle…

Example #2 – It doesn’t apply to any loan where the short sale process or review of that process (such as HAFA, HUD’s ATP, etc.) is already in the works.  Furthermore, the bank can claim that the “procedure” for handling a loan in default is already spelled out in a written agreement such as the deed of trust (which governs foreclosures as well).

…shall not apply with respect to any residential mortgage with respect to which the mortgagor and the mortgagee or servicer have entered into a written agreement before the date of the enactment of the Prompt Decision for Qualification of Short Sale Act of 2011.

Second, the time limit of 45 days does little to help Texas homeowners.  Why? Because it won’t stop a foreclosure which takes only 21 days.

…may not be construed to preempt, annul, or otherwise affect any other provision of law or of any contract or program that provides a shorter period than is provided under subsection (a)…

Third, there are no real teeth or penalties if the mortgage servicer doesn’t abide by the 45 day period.

…any creditor who fails to comply with any requirement imposed under this part…any actual damage sustained by such person as a result of the failure OR not less than $400 or greater than $4,000.

Bottom line is this:

• It is unlikely this bill will ever make it out of committee and into law.
• It doesn’t apply to most mortgages.
• There are few if any remedies available to the homeowner.
• Unless you have MASSIVE equity in your home you are not going to be able to prove actual damages that are in excess of what is owed on the mortgage AND even if the homeowner is awarded the maximum damage of $4,000 it will likely be used to offset missed mortgages payments, taxes, insurance, and whatever else the bank tacks on.

Oh and by the way…the response within the 45 days could still very well be NO.

We still maintain that in most cases, direct and aggressive litigation against the bank is the best way to secure: short sale approval, maximum commission for the REALTOR, and debt forgiveness for the homeowner.

Use a local real estate lawyer in your area not just to threaten, but SUE THE BANK.

- The Bank Slayer

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

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

The website, Housing Predictor carries some interesting commentary and at times casts some rather big assumptions, as far as where the housing market is headed (in our opinion); but kudos to them for spotlighting what the National Association of Realtors seems to be ignoring.

Bottom Line:  Tough to buy a new house if you can’t sell your current home.

-       The Bank Slayer

Tax Credit Losing Momentum

By Kevin Chiu, Housing Predictor

First time home buyers are being credited $12.5 billion in government tax credits, according to the Treasury Department. But the federal tax credit with the expansion of the program to move-up home buyers is losing momentum, a Housing Predictor analysis shows.

A boom to first time home buyers and real estate agents amid the highest volume of foreclosures on record, the tax credit was expanded by the federal government in November to include move-up home buyers. But only a small percentage of move-up buyers have been able to take advantage of the $8,000 credit. The majority have had trouble selling their current homes.

A survey of 50 housing markets monitored by Housing Predictor indicates that the heavy volume of purchases triggered by the tax credit has slowed. The credit boosted home sales last summer and during the last part of 2009 only to fizzle, lacking the ability to sustain a real recovery in the majority of housing markets surveyed. Only eight markets of the 50 surveyed demonstrated on-going strengthening with more home sales. The tax credit expires April 30th.

High unemployment in the majority of the country is still hampering any real sort of recovery in housing. Despite low interest rates, which may rise later in 2010, home sales dropped in January and February. Home prices showed signs of stabilizing from government programs in some areas of the country, but the pent up back-log of foreclosures listed for sale and a shadow inventory of properties are pressuring home values in most markets.

The Obama administration has pumped more than $1.4-trillion into the housing market from buying mortgages with tax credits and programs to refinance homes at lower rates, but still hasn’t made a major move to remedy ailing markets. “You’ve got a really big problem that requires big guns and the tax credit is just not big enough,” said Robertson Williams of the Tax Policy Center in Washington, D.C.

Mortgage holders who owe more on their home than it is worth in today’s market are another problem. Under water home owners are helping to eliminate any real recovery in the housing market as more choose to walk away from their homes rather than keep paying the mortgage. Most homeowners have to sell their home before they can move and without equity they are at a loss to do so.

The National Association of Realtors lobbied for and got the tax credit extension from Congress, who asked them not to come back to request an extension for the program again.

A bill to force lenders to modify mortgages for homeowners at risk of foreclosure is bogged down in Congress as an average of 8,600 foreclosures a day are recorded across the nation.