a new look to real estate

 
SSR  Report  &  Analysis  
The  FTC,  Mortgage  Assistance  Relief  Services;    
FINAL  RULE  
 
 
 By:    George  Cuevas,  Illinois  Licensed     Realtor    
                   
       
 
 
 
 
The FTC, MARS, and New
Regulations
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I. INTRODUCTION & BACKGROUND

Not to get too technical here, but it s always important to know how these types of
regulations are started and where they come from. In many cases they are started
with good intentions from the lawmakers and bureaucrats whom write them.
However, history shows time and time again that these laws & regulations may
have unintended consequences and cumbersome implementation which can be
both costly and do more harm than good. A copy of the Act we are discussing is
available for free download at the Federal Trade Commission website.

On Wednesday, December 1st, 2010 the Federal Trade Commission released 16

CFR PART 332, Mortgage Assistance Relief Services (MARS), Final Rule.
The final rule went into effect on December 29th 2010, and Section 322.5 went into
effect on January 31st, 2011. This Rule is part of the larger H.R. 1105, the 2009
Omnibus Appropriations Act, as clarified by the Credit Card Accountability
Responsibly and Disclosure Act of 2009 (The Credit Card Act).

If you have not heard of this Act before you should have, it was absolutely HUGE,
or OMNIBUS . The bill authorizes the spending of $408 Billion in non-
emergency outlays for fiscal year 2009. This omnibus covered multiple
governmental agencies and Acts, which is why you re reading this analysis today.

The New FTC Regulation affects the practices of all Persons and/or For-
Profit Companies, which, in exchange for a fee offer to work on behalf of
consumers (distressed property owners) to help them obtain modifications to the
terms of mortgage loans or to avoid foreclosure on those loans .i

If you didn t quite get the above statement from the Act, anyone or for-profit
company engaging in short sale transactions.

 
  
 
The Act enforces the following; i

• prohibits providers of such mortgage assistance relief services from making

false or misleading claims .
• mandates that providers disclose certain information about these services
• bar the collection of advance fees for these services
• prohibit anyone from providing substantial assistance or support to another
they know or consciously avoid knowing is engaged in a violation of the Rule
• impose recordkeeping and compliance requirements

Under the Omnibus bill, both the FTC and the States are permitted to enforce the
new rules the FTC issues. Both the FTC and States can seek civil penalties and
relief under the Act. After July 21, 2011 the FTC will transfer the FTC s authority
to prescribe rules and issue guidelines to the new Bureau of Consumer
Financial Protection, or BCFP.i This is new agency will be protecting consumers
engaging in a number of financial transactions and dealings, and regulating MARS
providers. MARS is defined on the next page.

II. SO WHAT DOES ALL THIS MEAN?

For all Realtors, Investors, and/or Processors dealing with short sales and
distressed property homeowners it means following certain practices and
disclosing them properly. Many of these new rules and regulations in the new Act
actually make sense and do reflect ethical business practices , which we all
should strive to achieve. This act also requires these disclosures be in print via
your marketing publications (websites, postcard, advertisements, etc ) and
disclosure forms, and implemented into your short sale process.

In this guide we will walk you though the disclosures and practices you need to
incorporate into your daily short sales operations. Furthermore, we have provided
a disclosure form you can incorporate into your short sale paperwork for your
clients. Finally, remember that if you are in this business of short sales it is your
absolute duty to provide your client(s) with the upmost ethical service you can
provide. Following these guidelines and procedures in the FTC Regulation helps
achieve this in a more structural fashion.
  
 
Before we move on, remember that these are new regulations and a new agency,
the BCFP, is being created to address issues in protecting consumers. This
means what ever it takes to be in compliance today may not be so 1-year from
now. Think of this as a possible organic issue, meaning we have to continue and
adapt to revisions and updates to the Act. This is similar to so many other things
in short sales, you constantly must adapt to the changes happening locally and
nationally.

a. WHAT IS MARS?

MARS, Mortgage Assistance Relief Services. MARS is the term used by the FTC
to describe all persons and/or for-profit companies that provide mortgage
assistance and/or relief services . The Act specifically names Short Sales as one
of the options available to consumers to avoid default and foreclosure. Therefore,
any Realtor, Investor, and/or Processor involved in a short sale transaction whom
has not followed this Act s Rules & Regulations, you will be in violation of them.

b. HOW TO STAY IN COMPLIANCE

The following sections will cover where and how you need to stay in compliance.
This will mean you have to adopt certain language into your Marketing, Short Sale
Paperwork/Disclosure Forms, and adjust some of your business procedures in
some cases. I cannot stress enough how you need check with your broker and a
licensed attorney in your state to make sure you are in compliance with the FTC
Act, as well as, any specific STATE rules and regulations. Your state may have
additional regulations regarding distressed property owners and short sales. If so,
you need to find out now and update your paperwork and procedures.

YOU ALSO MUST GO OVER THESE CHANGES, DOCUMENTS,

DISCLOSURES, AND PROCEDURES WITH YOUR BROKER AND
ATTORNEY TO VERIFY THAT YOU RE IN COMPLIANCE WITH THE
FEDERAL FTC REGULATION AND YOUR OWN STATES LAWS &
REGUATIONS CONCERNING DISTRESSED PROPERTY
HOMEOWNERS AND SHORT SALES!!!
III. MARKETING DISCLOSURES

ALL your marketing materials must include the following disclaimers now. This
includes your websites, marketing materials, postcards, mailers, or anything you
use to advertise your short sale services.

The following disclaimers should be incorporated into these communications:

a. (YOUR COMPANY NAME HERE) is not associated with the

government, and our service is not approved by the government
or your lender

b. Even if you accept this offer and use our service, your lender
may not agree to change your loan

This language should also be included in your disclosure forms as part of your
short sale paperwork. For Example in Chicago, we have added this language in
our website, marketing mailers, and short sale paperwork/disclosures, and short
sale listing presentations.

IV. SHORT SALE DISCLOSURE FORMS, PAPERWORK, AND

PROCEDURES FORM 1

Sections IV and V will review each section of the supplemental disclosure forms 1
& 2 that accompany this document on ssrclassroom.com. Again, check with your
Broker AND a Licensed Attorney in your state to verify the correct language and
disclosures you require to be compliance with the FTC and with your State s laws
and regulations concerning distressed property homeowners and short sales.
Doing your homework here will make you one more step ahead of other agents in
your market trying to do short sales.

 
  
 

1. YOUR COMPANY NAME HERE, may NOT request or receive

payment of any upfront fees or other consideration until the
consumer has executed a written agreement with their lender or
servicer incorporating the offer of mortgage assistance relief the
Short Sale Negotiator obtained.

SIDE NOTE FOR NO. 1: To take it one step further, you should NEVER
charge a distressed property owner for your services. If negotiated properly fee s
and commissions can always be part of most of your deals depending on your role
in the transaction. However, sometimes you will have a deal where a commission
and/or fee is completely cut for the Realtor and/or Processor. In these cases, you
should chalk it up to experience and consider it pro-bono work. Complete the
transaction professionally and it does create good karma, and that always comes
back tenfold.

2. YOUR COMPANY NAME HERE, must disclose, at the time

the Short Sale Negotiator furnishes the consumer with the
proposed written agreement with their lender or servicer (e.g.
the short sale approval letter), the following information:

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 nothing for our services and we will receive compensation
from either the purchaser or your lender/servicer for our services.
 
SIDE NOTE FOR NO. 2: The key words here are MUST DISCLOSE . You
must make every effort to allow your client to see and read the banks approval
letter and the language in it. How many stories have you heard about a
homeowner who short sold their property and thought they were released from any
deficiency, or going to receive a 1099, only to find out the exact opposite. You
don t want this to happen on any deal you are a part of. Therefore, if you have
negotiated the deal, or a processor negotiated the deal, and there is no full
satisfaction of debt you must disclose this to the homeowner/seller. Likewise, if full
satisfaction of debt is given and a 1099 to be issued, you must disclose this to the
homeowner/seller.

3. YOUR COMPANY NAME HERE, must provide, at the time

the Short Sale Negotiator furnishes the consumer with the
written agreement specified in paragraph (a) above, a notice
from the consumer s lender or servicer that describes all
material differences between the terms, conditions, and
limitations associated with the consumer s current mortgage
loan and the terms, conditions, and limitations associated with
the consumer s mortgage loan if he or she accepts the
dwelling loan holder s or servicer s offer

SIDE NOTE FOR NO. 3: The key words here are MUST PROVIDE .
WRITTEN AGREEMENT . You will have to create a separate disclosure form for
this. This form would be signed only after your seller has actually reviewed the
bank s approval letter and accepts the terms and conditions disclosed in it. Also,
like ITEM NO. 3 says it need to contain the language from ITEM NO. 2. This is
an important procedure that has to be done correctly. We feel this is also a good
practice to incorporate because it really protects the short sale agent/processor
and the homeowner/seller at the same time. If done correctly it places all parties
on the same page with one another so that there are no surprises after the
transaction takes place.
 4. YOUR COMPANY NAME HERE: its employees or associates
CANNOT:

1. Take any money from you.

2. Ask you to sign or have you sign any lien, mortgage, or deed.

SIDE NOTE FOR NO. 4: Again, follow these procedures and make them part
of your disclosures form. You should be negotiating your deals properly and there
really should be NO REASON to have to charge your seller s anything. This
should be a practice you and your team all follow.

5. Additional Disclosures and in compliance with federal legislation related

to the MARS Act:

1. YOUR COMPANY NAME HERE, 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.

SIDE NOTE FOR NO. 5: These are the same as the disclosures for your
marketing communications, they must also be repeated in your disclosures form.
6. Additional Disclosures and in compliance with federal legislation related to the
MARS Act:

YOUR COMPANY NAME HERE:

MORTGAGE ASSISTANCE RELIEF SERVICES DISCLOSURE

Before using this service consider the following information makes it

unlawful for any Short Sale Negotiator to engage in certain conduct
including:

The following disclosure is part of the Federal Trade Commission s

Mortgage Assistance Relief Services, MARS, Rules (16 C.F.R Part
322)

The MARS rule makes it unlawful for any Short Sale Negotiator,
Practicsioner, and/or Realtor to engage in certain conduct including:

a. YOUR COMPANY NAME HERE. Representing in connection with

the advertising, marketing, promotion, offering for sale, sale, or
performance of the short sale negotiation service, that a consumer
cannot or should NOT contact or communicate with his or her lender
or servicer;

b. Misrepresenting any material aspect of the short sale service,

including such things as:

• the likelihood of negotiating, obtaining, or arranging any

represented service or result;
• the amount of time it will take the Short Sale Negotiator to
accomplish the short sale negotiation;
• the consumer s obligation to make scheduled periodic
payments or any other payments pursuant to the terms of the
consumer s dwelling loan;
• the terms or conditions of the consumer s dwelling loan,
including but not limited to the amount of debt owed;
  
 
• that the mortgage assistance relief service provider has
completed the represented services or has a right to claim,
• demand, charge, collect, or receive payment or other
consideration;
• that the consumer will receive legal representation;
• the availability, performance, cost, or characteristics of any
alternative to for-profit mortgage assistance relief services
through which the consumer can obtain mortgage assistance
relief, including negotiating directly with the dwelling loan
holder or servicer, or using any nonprofit housing counselor
agency or program;
• the amount of money or the percentage of the debt amount that
a consumer may save by using the mortgage assistance relief
service;
• the total cost to purchase the mortgage assistance relief
service; or
• 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.

c. Making a representation about the benefits, performance, or

efficacy of any short sale negotiations service unless, at the time
such representation is made, the provider possesses and relies upon
competent and reliable evidence that substantiates that the
representation is true.

If you stop paying your mortgage, you could lose your home and
damage your credit.
SIDE NOTE FOR NO. 6: This is more than simply just language that is
required on a disclosure form. The MARS Rule makes these conditions pretty
clear in the opening sentence, which reads;

The MARS rule makes it unlawful for any Short Sale Negotiator to engage in
certain conduct including

The list is important, make sure you understand this language and implement what
it says into each one of your transactions. DO NOT MISREPRESENT ANYTHING.
The language is clear, concise, and makes sense.
 7. Owner s Right to Cancel:

You may stop doing business with YOUR COMPANY NAME

HERE at any time. You may accept or reject the offer of
mortgage assistance we obtain from your lender or loan
servicer. If you reject the offer, you do not have to pay YOUR
COMPANY NAME HERE. If you accept the offer, YOUR
COMPANY NAME HERE will be paid by the purchaser and/or
lender approving the short sale for our services.

SIDE NOTE FOR NO. 7: A short sale transaction can be a stressful time for a
homeowner and even the short sale agent/processor. During the process the
homeowner may change their mind and want to try an other Alternative to
Foreclosure. If the seller wants to cancel and stop doing business with you and
your company you CANNOT hold them liable for anything. This is OK. You don t
want to work with anyone who does not want to work with you, or who wants to go
a different route. Cut your losses, return the paperwork quickly, and be courteous
to the seller in a professional manor. Real estate agents, WE don t ever charge
the homeowner directly and get paid only on commissions. WE suggest that you
don t charge the seller additional fees. If you are a mitigation company we also
suggest you get paid by the buyer and/or bank approving the short sale.
8. Last Section

Owner hereby recognizes and acknowledges that he/she/they have

read understood, and received a copy of this disclosure in connection
with both the MARS federal Act as well as the proper state of YOUR
STATE NAME HERE disclosures.

___________________________________________________
Property Owner Signature Date

___________________________________________________
Property Owner Signature Date

YOUR COMPANY NAME HERE:

By:
(Processor) (Authorized Agent)

SIDE NOTE FOR NO. 8: This is the final section. Both parties sign off on this
disclosure and it goes into practice. Also, you are including your States Rules
and Regulations into this section and acknowledging it here. Make sure to adapt
your disclosure form accordingly.
V. SHORT SALE DISCLOSURE FORMS, PAPERWORK, AND
PROCEDURES FORM 2 ‒ LISTING DISCLAIMER

1. LISTING DISCLAIMER

SELLER’s NAME HERE 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 $0.00 for our services.

SIDE NOTE FOR NO. 1: This is a separate document which should

accompany the listing agreement between the real estate agent and the
seller/homeowner. It s a little repetitive from language from the Form 1 but call it
overkill.
VI. RECORD KEEPING

The Rule also imposes several recordkeeping requirements. This includes all
contracts, disclosures, addendums, basically everything on a particular file for 24
months. Most importantly make sure the MARS specific documents are included
in these files. This really makes sense, because you should already be keeping
copies of all your closed real estate transactions for far longer than 24 months.
You must be able to provide these documents immediately if you are ever under
review from your state or the FTC.

VII. CONCLUSION

Let s keep this simple. Read through this report and get the additional reviews and
revisions finished by your Broker and Attorney. Second, get into compliance with
any State Regulations and finalize your documents. Finally, execute the same
procedures listed in your disclosure forms in your day-to-day short sale operations.
Good luck and stay tuned for more updates on this important topic.

SOURCE MATERIAL
                                                                                                               
i  Federal  Register,  Part  VI,  Federal  Trade  Commission,  16  CFR  Part  322,  Mortgage  

Assistance  Relief  Services:  Final  Rule.    Wednesday  December  1,  2010