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