MARS Rule Simplified for Real Estate Agents

The MARS rule formerly required a series of disclosures, which many complained were misleading and confusing to distressed borrowers working on short sales.

Now, however, there is a stay on many of these disclosures.

According to a press release from the FTC:

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.

The Commission stated that the stay does not apply to real estate professionals who provide other types of mortgage assistance relief, such as loan modifications. In addition, the FTC will continue to enforce the Rule and Section 5 of the FTC Act, which prohibits unfair and deceptive practices, against all other providers of mortgage assistance relief services.

FTC decides not to enforce parts of MARS

The Federal Trade Commission is no longer enforcing several provisions outlined in the Mortgage Assistance Relief Services rule, known as MARS, to ensure distressed homeowners have clear and easy access to foreclosure prevention services, including short sales.

"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," the FTC said in a statement.

The FTC said it is backing away from enforcement of the MARS provisions to ensure the guidelines do not "inadvertently discourage real estate professionals from helping consumers with these types of transactions."

The MARS rule was issued in 2009 after the FTC brought law enforcement actions against foreclosure and mortgage relief companies. The rule outlined several disclosures that have to be made by a company offering foreclosure relief services, including short sales.

The MARS rule specifically required participants to disclose more information about their services and banned advanced fee collection.

In a press release issued Friday, the FTC said the rule caused a number of real estate professionals to report back, saying the disclosures were "confusing customers and inaccurate in some contexts."

The stay on enforcement applies only to real estate professionals who are licensed, in good standing under state requirements and in compliance with all laws. Anyone who meets these requirements is now exempt from "the obligation to make disclosures and from the ban on collecting advance fees," FTC said. However, any misrepresentations made to distressed homeowners pursuing a short sale are still subject to enforcement action by the FTC.

The commission's exemptions do not apply to professionals who provide other types of mortgage debt relief or loan modifications. Section 5 of the Federal Trade Commission Act, which bans unfair or deceptive practices, remains in full effect and is not impacted by the MARS changes, according to the FTC. - by KERRI PANCHUK

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MARS Instruction Sheet for REALTORS® - Utah

If you advertise to the consumer that you offer short sale services; take a listing on a short sale; negotiate a short sale with a lender on behalf of a client; or hire a individual or vendor to negotiate a short sale the following information is IMPERATIVE to your business.

The following came into effect January 31, 2011. If you have a short sale transaction where you had any involvement after January 31, 2011 you are required to have the attached “MARS” forms included with your transaction and all communication with the consumer needs to include the mandatory disclosure language.

INSTRUCTION SHEET FOR REALTORS®

HOW TO COMPLY WITH THE MORTGAGE ASSISTANCE RELIEF SERVICES (“MARS”)

DISCLOSURE REQUIREMENTS

1. Background. The Federal Trade Commission (FTC) issued the final Mortgage Assistance Relief Services (“MARS”) rules that impact real estate professionals who represent clients involved in Short Sale transactions. If you offer any of the following services, the MARS rules apply to you and you must make the FTC required MARS disclosures: advertising to the consumer that you offer short sale services; taking a listing on a short sale; negotiating a short sale with a lender on behalf of a client; or hiring a individual or vendor to negotiate a short sale.

2. Instructions. When offering any of the Short Sale services referenced above, there are 3 types of MARS disclosures that a Realtor® must make to the consumer. In all cases, the disclosure must be clear and prominent. The 3 types of disclosures are as follows:

a) General Communications. If a Realtor® sends out a general advertisement that offers short sale services in any media whether it be in print, audio, verbal, electronic or otherwise, the Realtor® must include the mandatory MARS disclosure language contained in Form A - General Communications MARS Disclosure.

b) Consumer Specific Communications. If the Realtor® becomes aware that a specific transaction in which he or she is involved may be a Short Sale, and that Realtor® negotiates any portion of the Short Sale with the lender on behalf of the Seller, or arranges for an individual or vendor to conduct Short Sale negotiations with the lender on behalf of the Seller, the Realtor® must provide the Seller with the mandatory MARS disclosure found on - Form B - Consumer Specific Communications MARS Disclosure.

c) Lender’s Short Sale Offer Disclosure. Once the Realtor® who represents the Seller on a Short Sale receives the lender or servicer’s Short Sale Third Party Approval letter, the Realtor® must provide the following two mandatory MARS disclosures to the Seller:

a. Form C – Third Party Approval From Lender MARS Disclosure; and

b. Form D – MARS Lender Disclosure.

MARS - Mortgage Assistance Relief Services Disclosure

Since the beginning of the mortgage crisis, a growing trend of fraud has plagued an already challenging situation for millions of American homeowners. To address this issue, the Federal Trade Commission (FTC) has issued the Mortgage Assistance Relief Services (MARS) Ruling.

Effective January 31, 2011 MARS client / homeowner disclosure:

• ZOOM! Loss Mitigation does not collect any upfront fees for our services

• Our companies minimum total fee is $1997.00 for services rendered

• Our clients / homeowners can stop using your services at any time (a fee may apply)

• ZOOM! Loss Mitigation Specialists is not associated with the government or any lender(s)

• The lender(s) may not agree to participate in a Short Sale or change the terms of the borrowers mortgage(s)

• We have always advised our clients to prioritize their debts and pay their mortgage lender(s) to the best of their ability

• We advise our clients to continue communicating with their lender or servicer

• 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 will owe $1,997.00 for our services.

• ZOOM! Loss Mitigation Specialists is not associated with the government, and our service is not approved by the government, and our service is not approved by the government or your lender.

• Even if you accept this offer and use our service, your lender may not agree to participate in a Short Sale of your property.

Thank you!

Non-Arms Length Short Sale Transactions

Be advised that HUD/FHA/VA, Fannie Mae, Freddie Mac & FDIC are now carefully auditing short-sale transactions going forward and are also looking at previous closed short-sale settlements that may have been considered non-arm's length transactions. Agents, brokers, sellers and buyers should be aware of the “Arms Length Transaction” affidavit that many lenders/investors are now requiring all parties to sign. This specific language could be included in the short-sale approval letter itself or may be a totally separate agreement all together (such as in the form of an Affidavit) and can read something to the following effect:

“Whereas, all parties relevant to this transaction are hereby indicating to XYZ Mortgage Corporation that no party to this contract is a family member or business associate or shares a business interest with the mortgagor(s) or mortgagee. It is further stipulated there are no “hidden terms” or “special understandings” between the seller(s), buyer(s) or their agent(s) in order to entice, induce or otherwise defraud the seller’s mortgagee in this transaction. This purchase contract is not assignable. If the purchaser intends on performing a simultaneous closing (aka flip) such a transaction can take place only if the re-conveyance is of equal or lesser value as to the current sales price indicated in this transaction. The Buyer(s) & Seller(s) nor their Agent(s) listed below have any agreements (written or implied) that will allow the Seller(s) to remain in their property as renters or to regain ownership of said property after the successful execution of this short sale transaction.”

This is pretty self explanatory and if these stipulations are non-issues for your particular deal than you should be fine. But (if you have to think twice about this) you need to be very careful and think twice before you sign such a document. You would be surprised on some of the things that people have attempted to pass through our office thinking no one would know or find out. Keep in mind, lenders will not accept a sales contract that shows the contract can be assigned. If the buyer is planning on flipping the property, he or she will have to arrange a double close (or simultaneous closing). There is nothing unethical or wrong about doing the double close as long as it does not violate the parameters stipulated by the short-sale mortgagee.

Just be aware that HUD/FHA/VA, Fannie Mae, Freddie Mac & FDIC do not want to see anyone obviously taking advantage of their financial disadvantage. Lenders and investors will not tolerate "Bail-Out" situations that allows the distressed homeowner to benefit from their loss.

In addition, if it is non-arms length the lender will not pay an agent a commission.

Bank of America Cooperative Short Sale

• A cooperative approach to a short sale may provide the quickest route to a short sale decision if you begin the processearly enough, such as during your initial discovery conversations with the homeowner.

• A cooperative short sale provides terms of the short sale before marketing the home.

If you do not have an offer, the agent or homeowner can call to request a cooperative program eligibility review.

Benefits of a Cooperative Short Sale:

1.Non-owner occupied eligibility

2.Jumbo loans my qualify

3.Early investor/insurer approval shortens decision time

4.Initiate process prior to marketing the property

5.Lender decision within 10 business days

6.The investor may require cash at closing or a promissory note

7.The investor may require the right to pursue deficiency

8.Foreclosure placed on hold with signed purchase agreement

9.Credit impact is typically less than a foreclosure – deficiency charge off will be reported to credit bureaus

10.$2,500 relocation assistance

Bank Of America Announces Cooperative Short Sale Program & New HAFA Guidelines

Bank of America announced their new Cooperative Short Sale Program. This program is officially being launched this month. The guidelines for this new program will be posted on our blog shortly.

New HAFA guidelines have been released and go into effect on February 1st, 2011. Below are the highlights and changes:

1) HAFA is now almost..a NO DOC short sale. Servicers are no longer required to verify a borrower’s financial information or determine if the borrower’s total monthly mortgage payment exceeds a 31% debt-to-income ratio. It seems that Treasury has wised up to the fact that it makes no sense to give a hoot about someones income to debt ratios when they are….selling the house.

“While this requirement has set the standard for mortgage affordability under HAMP, it is not as important for homeowners ready to transition out of their home,” a Treasury official said. “Eliminating this requirement further streamlines the process for homeowners applying to the program.”

2) Servicers still must obtain a signed hardship affidavit. So, even though short selling owners no longer have to prove their financial hardship…they must sign an affidavit stating they have a hardship. I am no legal eagle but, doesn’t this hardship affidavit sound utterly pointless?

3) Seconds now receive a max of $6,000. In other words, HAFA pays seconds up to $6000 to accept the short sale. I am assuming that the original HAFA rules still apply that the seconds (and firsts) can’t pursue any recourse if they accept HAFA money.

4) Borrowers must receive a HAFA Short Sale agreement within 30 days of submitting paperwork.

To find out if you or one of your clients qualifies for the HAFA program simply go to http://www.CheckYourEligibilityNow.com.

Please follow MLS rules when compensating short sale processing companies - Utah

Under well-established National Association and Wasatch Front Regional Multiple Listing Service rules, all offers of cooperating compensation (Buyer Agent Commission) must be blanket offers of compensation (i.e., available to all cooperating brokers who are MLS members). The compensation offered to MLS members in the BAC section must also be "unconditional," so buyer's agents know what they will be paid prior to endeavoring to sell the property.

Conditions to the BAC, or events and other factors that may limit or reduce the unconditional offer of BAC, cannot be inserted in the remarks section of the MLS.

The only exception to unconditional compensation offers involve a short sale when the private listing remarks state that any reduction "required by the lender as a condition of approving the sale" will be apportioned between the brokers.

Some listing brokers are now hiring third-party processing companies to help with the processing and negotiations between the seller and the lender.

In these circumstances, some listing brokers have inserted the following comments in the MLS remarks: "The processing company and or the negotiator will be paid part of the commission" or
"The commission offered to the buyer's agent will be reduced by the amount to be paid to the seller's negotiator."

This practice of unilaterally inserting a change to the BAC requiring the buyer's agent to pay for third parties hired to assist the seller or the listing broker is not allowed under the MLS unconditional compensation rules. The processor or negotiator should be paid by the seller unless the buyer and/or the buyer's agent specifically agree in writting outside of the MLS to share the cost (i.e., Commission / Escrow Agreement).

One solution may be for the listing broker to reduce the amount of the BAC if the seller desires to hire a processing or negotiation company with increasing the total cost of the transaction. The bottom line is that whatever BAC is offered, this amount must be paid unless the buyer's broker specifically agrees otherwise (i.e., Commission / Escrow Agreement).

By Brad Baldwin - Legal Counsel, Wasatch Front Regional Multiple Listing Service