Written by DSNews: HEATHER HILL CERNOCH
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13 May 2011
New FTC Rule Impacts Realtors' Short Sale Business
According to the National Association of Realtors (NAR), a new rule from the Federal Trade Commission that aims to protect homeowners from mortgage relief scams may impact real estate professionals who represent clients involved in short sale transactions.
The Mortgage Assistance Relief Services (MARS) rule, which applies to residential real estate transactions, took effect January 31.
Laurie Janik, NAR general counsel, overviewed the new rule Wednesday at a forum during the Realtors 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C.
“As the leading advocate for homeownership, NAR supports efforts to ensure that mortgage assistance relief services truly benefit consumers,” Janik said. “Nevertheless, NAR has some concerns about the rule and its application to real estate professionals involved in short sales transactions.”
Primarily directed at companies offering modification services to consumers, the rule bans all upfront fees for renegotiating mortgage terms and mandates that certain disclosures are made to consumers if a short sale is negotiated with a lender on their behalf or when advertising short sales experience.
But according to Janik, the rule may also impact real estate professionals who represent clients involved in a short sale transaction.
She explained that it pertains to such practices as advertising short sale negotiation services or other short sale expertise, communicating with a consumer about a possible short sale before the listing agreement is executed, negotiating a short sale on behalf of a consumer, or arranging a short sale negotiation for a consumer.
Realtors must comply with the rule by not taking upfront fees and using specific disclosure language, Janik explained.
A real estate professional now needs to include a clear and prominent disclosure in all commercial messages that advertise short sale services. In addition, second and third disclosures are required by real estate professionals before they begin mortgage assistance services on their clients’ behalf and at the time they present their client with the lender’s short sale approval letter.
“NAR is discussing with the FTC some language in the second and third disclosures as well as some other requirements found in the MARS rule,” Janik said. “The FTC is considering possible options to help make the rule more applicable to a real estate brokerage…when they are performing traditional real estate functions in a short sale transaction.”
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