The Federal Trade Commission has announced that it will not enforce most provisions of its Mortgage Assistance Relief Services (MARS) Rule against real estate brokers and their agents who assist financially distressed consumers in getting short sales from lenders or servicers.
As a result, brokers and agents will not have to make several disclosures required by MARS that, in the context of assisting with short sales, could be misleading or confuse consumers, according to the FTC.
"As more homeowners seek short sales, it is especially important that MARS not inadvertently discourage real estate professionals from helping consumers with these types of transactions," FTC officials stated.
The MARS Rule was issued pursuant to authority granted by Congress in 2009. It followed several 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.
MARS covers companies or individuals, among others, who help consumers receive 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 help 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.
MARS 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 it went into effect, many brokers and agents helping with short sales raised concerns about complying - pointing out that some of the required disclosures could confuse consumers or could be inaccurate in this context.
The FTC's decision not to enforce most provisions of MARS 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 stay does not apply to real estate professionals who provide other types of mortgage assistance relief, such as loan modifications.
Also, the FTC will continue to enforce MARS and Section 5 of the FTC Act, which prohibits unfair and deceptive practices, against all other providers of mortgage assistance relief services.
