Mortgage Assistance Relief Service Rules Reprieve for Certain Real Estate Propfessionals!
Monday, July 18, 2011 at 9:57AM Who Is Entitled to Relief From Enforcement
July 15, 2011
Just being a licensed Realtor is not enough. The relief from enforcement applies 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 key requirement for licensed Realtors is the third qualification. The relief only applies when in connection with a sale of the consumers home.
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 Sections 5 of the FTC Act and Section 322.3(b)’s of the MARS Rule.
Payment Up Front is Allowed
One of the the key provisions of the MARS Rules was prohibition of charging fees up front for MARS services. If you ceased doing this based on the MARS rules you may want to consider going back to your previous method of charging for your services.
No Required Disclosures
The disclosure requirements are no longer being enforced by the FTC. That being said, it may be wise to consider creating your own disclosures based upon the FTC Disclosures and modify your listing agreements to expressly state the short sale services provided or not provided.
Relief Could Be Temporary
On July 21st, the enforcement of MARS switches to the Consumer Financial Protection Bureau ("CFPB") so it will ultimately be up to the CFPB as to how the MARS rules will be enforced or whether they chose to amend the rules. The other word of caution is that state enforcement agencies still might enforce all provisions of the MARS rules, although this seems unlikely.
Section 322.3(b) Still Applies
Misrepresentations included, but are not limited to, the following:
a. The likelihood or negotiating, obtaining, or arranging any represented service or result (16 C.F.R. 322.3(b)(1));
b. The time it will take the MARS provider to accomplish any represented service or result (16 C.F.R. 322.3(b)(2));
c. That a MARS is affiliated with, endorsed or approved by, or otherwise associated with (16 C.F.R. 322.3(b)(3)):
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- The United States government,
- Any governmental homeowner assistance plan,
- Any federal, state or local government agency, unit or department,
- Any nonprofit housing counselor agency or program,
- The maker, holder, or servicer of the consumer’s dwelling loan, or
- Any other individual, entity, or program;
d. The consumer’s obligation to make scheduled periodic payments or any other payments pursuant to the terms of the consumer’s dwelling loan 16 C.F.R. 322.3(b)(4);
e. The terms or conditions of the consumer’s dwelling loan (16 C.F.R. 322.3(b)(5));
f. The terms or conditions of any refund, cancellation, exchange, or repurchase policy for a MARS (16 C.F.R. 322.3(b)(6));
g. That MARS provider has completed the represented services or has a right to claim, demand, charge, collect, or receive payment or other consideration (16 C.F.R. 322.3(b)(7));
h. That the consumer will receive legal representation (16 C.F.R. 322.3(b)(8));
i. The availability, performance, cost, or characteristics of any alternative to for-profit MARS through which the consumer can obtain mortgage assistance relief (16 C.F.R. 322.3(b)(9));
j. The amount of money or percentage of the debt amount that a consumer may save (16 C.F.R. 322.3(b)(10));
k. The total cost to purchase the MARS service (16 C.F.R. 322.3(b)(11)); or
l. The terms, conditions, or limitations of any offer of mortgage assistance relief the provider obtains from the consumer’s dwelling loan holder or servicer (including the time period in which the consumer must decide to accept the offer) (16 C.F.R. 322.3(b)(12)).
Section 5 of the FTC Act Still Applies
Section 5 of the FTC Act prohibits entities from engaging in unfair or deceptive acts or practices in interstate commerce.
Conclusion
While the FTC has stated that they will not enforce certain parts of the MARS Rule, the Rule has not yet been amended so that position could change in the future. Since enforcement of the MARS Rules will be switch to the CFPB on July 21st, the FTC announcement will mean nothing if the CFPB does not do the same.
Realtors should carefully look at Section 322.3(b) relating to misrepresentations to make sure they are in compliance. For instance, if you are claiming a certain rate of success, make sure you document the results at the time the representation is made (i.e., a 90% short sale success rate - do you have proof of this claim?).
Realtors should also consider using short sale disclosures and incorporating relevant parts of the MARS disclosures.
Finally, Realtors should make sure that their listing agreements expressly state what short sale services are provided or not provided. I rarely, see a listing agreement that states what the Realtor is actually doing in connection with the short sale. This puts the Realtor at risk and can create false expectations by the consumer.
FTC July 1st Announcement Regarding MARS Enforcement Against Realtors
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NOTICE The foregoing is not intended to constitute legal advice for any specific circumstance, but is intended to reflect broadly applicable principles, under Minnesota law, relevant to a typical situation. Each set of facts and each contract is, or can be unique; the unique facts and specific language of the contract may require a different legal analysis and may result in a different outcome. Before proceeding in reliance upon this or any other general description of law, consult with an attorney competent in the field of practice relevant to your situation. Copyright 2011 Nash Law Firm |