Earlier this year we told you about new federal rules that would potentially affect Realtors® (and others) involved in short sale negotiations. These so-called MARS rules from the Federal Trade Commission (FTC) impose restrictions on individuals performing certain Mortgage Assistance Relief Services, which include activities such as negotiating with lenders on behalf of sellers.
Those restrictions include a prohibition on up-front fees and requirements to provide three different types of disclosures during the transaction – one disclosure during advertising, one when you start working with a specific seller, and one when an offer of a mortgage modification is made by a lender. Unfortunately, because the rules were written primarily to address providers of standalone negotiation services (providers who advertised that they’d negotiate with lenders but provide no other services), these requirements do not work well for real estate practitioners.
NAR has been working on this issue since before the rules became effective and continues to push the FTC for changes or clarifications on the role of a salesperson. Things may be getting closer to a resolution, although we’re not there quite yet.
At the NAR Midyear meetings in May, NAR’s general counsel announced at the Risk Management Forum (and perhaps elsewhere) that FTC staff had advised her that real estate practitioners would not need to use two of the disclaimers, but should still avoid up-front fees, and should still use the general advertising disclosure. Although no regulatory changes have formally been made as of yet, FTC staff advised that compliance with those two provisions of the rules would be sufficient.
Regardless of this advice, some brokers may wish to comply with the full letter of the regulations rather than with this unofficial guidance passed on by NAR. Further, staff has heard reports that lenders are sometimes requiring full compliance with all rules to ensure that there is no question about the transaction.
To facilitate those brokers who wish to comply with the letter of the regulations, PAR has created two MARS disclosure forms. These forms, along with the general advertising disclosure and – most importantly – a more detailed explanation of the rules, can be found on the PAR website. You will also find more detailed information on the MARS page of the NAR website.