MARS


On July 15, 2011 FTC DECLARES:

  • real estate brokers can conduct short sales and
  • can collect advance fees if they follow their own state guidelines.
  • real estate brokers do not have to make several disclosures required by MARS.
  • that as more and more American homeowners seek short sales, it is especially important that MARS not inadvertently discourage real estate professionals from helping consumers with these types of transactions.

I am keeping track of the Federal Trade Commission (FTC) Mortgage Assistance Relief Services (MARS) Rule.  My previous post proposing that MARS did not apply to the real estate profession from May 4, 2011 is here Advance Fees – Short Sales – FTC II.  As stated prior, I believe MARS should not affect licensed real estate sales persons, rather is directed at individuals and companies that do not already have a structure in place to police their conduct.

As of July 15, 2011 the FTC has stayed enforcement of many of the provisions of MARS against real estate professionals helping consumers obtain short sales.  The FTC declared the stay on enforcement includes a stay on the collection of advance fees.  Therefore brokers can conduct short sales and can collect advance fees if they follow their own state laws and regulations. See the July 15, 2011 FTC press release here:  http://www.ftc.gov/opa/2011/07/mars.shtm The FTC has ruled on a unanimous vote the following:

FTC 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. 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.”

See my earlier blogs on Advance Fees

Advance Fees – Short Sales – FTC II May 4, 2011
Advance Fees Continued and the FTC 01.06.2011
Short Sale Advanced Fees 12.3.2010
Charging for negotiating short sales/Negotiators 10.1.2010

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             As everyone probably has heard, the FTC came out with a 54 page Rule which declared that MARS activities, such as short sales, cannot be linked to advance fees.

I am surprised that the REALTOR® community has  acquiesced to this ruling.  My first blush at this matter: real estate agents are not the subject matter of this Rule, it is directed to loan service companies, loan mod companies, etc.  I put those opinions in my notes here – https://ameglegal.wordpress.com/2011/01/06/advance-fees-continued-and-the-ftc/

Obviously we are not out of the woods.

I want to try and explain, in detail, why I think the REALTOR® community  should announce that they are not the intended target of this FTC Rule and that  GLVAR, NVAR and NAR should support this position.

The question is, “do Nevada real estate salespersons conducting sales that involve short sales fall under this Rule?”

SHORT ANSWER.

 “Not  necessarily.” A Nevada real estate  salesperson is not a short sale negotiator, is allowed by statute to charge an advance fee and is not a MARS service provider per Foot Note 126 of the Rule.

LONG ANSWER.

What is MARS and where did it come from?  ‘‘Mortgage Assistance Relief  Services.”  It is Pursuant to the 2009  Omnibus Appropriations Act (Omnibus Appropriations Act), as clarified by the Credit Card Accountability Responsibility and Disclosure Act of 2009 (Credit CARD Act).  The FTC Rule is a Final Rule and Statement of Basis and purpose (SBP) concerning the practices of for-profit  companies that, “in exchange for a fee, offer to work on behalf of consumers to  help them obtain modifications to the terms of mortgage loans or to avoid foreclosure on those loans.”

What is a real estate broker?  A real estate salesperson in Nevada is one that:

a.) “…accepts consideration for assisting, soliciting or negotiating the sale, purchase, option, rental or lease of real property.” NRS 645.005.

b.)  “…with the intention .. of receiving compensation…sells, exchanges, options, purchases, rents or leases, or negotiates or offers, attempts or agrees to negotiate the sale, exchange, option, purchase, rental or lease of … real estate” NRS 645.030

c.) “…engages in or offers to engage in the business of claiming, demanding, charging, receiving, collecting or contracting for the collection of an advance fee … to promote the sale of real estate. NRS 645.030.  (Yes, an advance fee, see below).

The short recaps:

MARS: “…work …to help … obtain modifications to the terms of mortgage loans or to avoid foreclosure on those loans.”

Real Estate Broker: “…assists, solicits or negotiates the sale, purchase, option,  rental or lease of real property.”

Real estate agents sell property.  They assist sellers in selling which in turn can remove debt liability when the asset is sold.  Whether the asset is under  water or not that should not automatically render that service MARS.  They also help consumers choose property inspectors, but are not real property inspectors.  They assist consumers in  locating loans, but are not mortgage providers.  They assist in setting up 1031 Exchange tax deferred exchanges, but are  not CPA’s.  They assist in contracting  for the sale of real estate, but are not lawyers.

Why the confusion  then?  Because the FTC Rule §  322.2 Definition:

(i) ‘‘MARS’’ means any service … (6) Negotiating,  obtaining or arranging: (i) A short sale of a dwelling.  

Why then is a Real Estate Agent’s conduct not MARS?  I believe the Rule  is only referring to companies that offer such services that are not already licensed real estate brokers for a number of reasons:

a.)  The Rule talks of MARS providers that often claim to possess specialized  knowledge of the mortgage lending industry, sometimes touting their hiring of  former mortgage brokers and real  estate agents to bolster their claims of purported expertise.  [This would appear to discuss a loan  modification company, not a real estate brokerage.]

b.)  The actual press release  of FTC said:

i.)  “providers of mortgage foreclosure  rescue and loan modification services” [see what an agent does above] and

ii.)  “mortgage relief scams that have sprung up during the  mortgage crisis.”  [Selling real  estate is not a scam, and it certainly did not just spring up.].

iii.) “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…[again, a real  estate broker is not a ‘relief company’ and I refrain from making light if whether real estate agents are ever a “relief”.]

c.)  Section V (C). describes the difficulty in knowing how many MARS companies  there are.  [Real estate brokers are not mentione].

“The Rule will apply to MARS providers. Based upon its knowledge of the industry, the Commission believes that a variety of individuals and companies provide or purport to provide such services, including telemarketers, mortgage brokers, lead generators, payment processors, contractors that provide back-room services, and attorneys.” FR Vol. 75, No. 230 Page 75137. [Real estate brokers are not mentioned.]

d.)  The rule itself states, it does not consider real estate agent services to be MARS.  See Foot note 126 of the 54 page Rule:

“As a general matter, the Final Rule is not intended to apply to the marketing of services to assist consumers in selling their properties to third parties.  The Final Rule, however, does specifically cover the marketing of services involving the sale of properties to third parties if those services are designed or intended to assist consumers in averting foreclosure, e.g., through a short sale or deed-in-lieu of foreclosure.  One commenter urged the commission to exempt  licensed real estate professionals from the Final Rule. NAR at 1–2.  The commenter argued the Rule would restrict real estate agents in helping consumers with the process of selling their homes through short sales. Id.  The Commission concludes that an  exemption for real estate agents is not necessary.  Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers.  The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS.

Finally, Nevada has an advance fee  statute, which allows, “the collection of an advance fee for an advance fee listing.”  An Advance fee listing” is a brokerage agreement by which a person who is engaged in promoting the sale of real estate agrees to render to an owner to  promote the sale or lease of the property, for an advance fee.”  Why not simply rely on the current laws of Nevada?   Real estate brokers are not loan companies.  Why are real estate brokers agreeing to new limits on their services that only apply to MARS providers.

I have to say it, “women are from Venus, real estate agents are not from MARS.”

ANY COMMENTS are appreciated.

See my earlier blogs on Advance Fees