The National Association of Realtors’ top choice would have been to exclude real estate broker from the Federal Trade Commission’s Mortgage Assistance Relief Services Rule, or MARS.
“Obviously, we would like to have exempted real estate brokers, and if the FTC had offered that, we would have said, “Thank you very much,” NAR attorney Laurie Janik told InsideRealEstateNews this morning.
“But I do not see that happening,” said Janik, a Chicago-based attorney, who is negotiating with the FTC to get some clarification regarding some of the disclosure requirements for real estate brokers handling short sales.
Real estate brokers not to blame
Real estate brokers are not the root cause of the problems that led to the creation of MARS, which went into effect on Jan. 31, she said.
“Real estate brokers have not been involved in any of the 40 or so enforcement actions that have been brought to date by the FTC,” Janik said. “We do not believe that real estate brokers are in the heart of the bull’s eye,” which led to the creation of MARS.
That said, Janik cautions that real estate brokers are bound by MARS.
The NAR is not looking to change what is considered to be the most critical part of MARS, which bans accepting upfront fees from distressed homeowners seeking a short sale. Some companies had been charging upfront fees for people seeking loan modifications to prevent a foreclosure, but were doing little or nothing to help them. The rule was extended to short sale transactions.
“Brokers should not ever charge upfront fees,” Janik said.
That extends to short-sale transaction companies that are brought on by brokers to help facilitate the time-consuming and complicated short-sale process, she said.
MARS also requires numerous advertising requirements, which InsideRealEstateNews detailed in an earlier article.
“If brokers are advertising themselves as short-sale specialists because they have passed some course or they have done more than 100 short sales, they must include in their advertisements all of the disclaimers required under this rule,” she said.
Disclosures need tweaking
A couple of the rules, however, are not a “good fit” for real estate brokers, she said, which the NAR is seeking to have clarified.
For example, the rule requires brokers to tell consumers they can stop using their services anytime.
“What the FTC is referring to is that you can stop using our mortgage relief services anytime,” Janik said.
In most cases, she said, the broker has a listing agreement with the homeowner, and MARS does not give them the right to void the listing agreement at any time. The home seller is still bound by the listing contract.
“The intent was not to allow them to walk away from a listing contact,” Janik said. “It’s confusing to consumers.”
Also, MARS requires various disclosures that pertain to loan modifications, but also are being required during short sales, she said.
That just doesn’t make any sense, she said.
“They have all of these required disclosures that are demanding you use loan-modification terms. They are about loan modifications and not short sales,” Janik said. “We want to make sure they are requiring meaningful disclosures. Some of these disclosure requirements are not helping anyone.”
Contact John Rebchook at JRCHOOK@gmail.com.