The Mortgage Assistance Relief Services (MARS) Rule was issued by the Federal Trade Commission to protect distressed homeowners from mortgage relief scams that have sprung up during the mortgage crisis. The MARS Rule imposes an advance fee ban, advertising restrictions as well as disclosure and recordkeeping requirements on companies and individuals involved in MARS related activities.
WHO IS COVERED?
The rule applies to real estate brokers, agents and mortgage lenders who provide, offer to provide, or arrange for others to provide mortgage relief services or refer a client or customer to a MARS services provider in an attempt to halt a foreclosure or obtain lender approval of a short sale.
The FTC Rule defines MARS activity as including negotiating, obtaining and arranging a short sale. Under this definition, an agent or broker who performs the following services would fall under the definition of a MARS services provider and would be covered by the MARS Rule:
negotiates a short sale with a lender or servicer on behalf of a client
represents to consumers that they are engaged in the business of assisting consumers to avoid foreclosure by negotiating a short sale with a lender. This means that if you advertise your ability to assist clients with avoiding a foreclosure by negotiating a short sale, you are covered.
refers a consumer to someone who is a MARS provider of short sale negotiation services.
WHAT MUST YOU DO?
If you have done any of the activities listed above since January 1, 2011, you will need to make the appropriate disclosure(s) and meet certain record keeping requirements. Under the MARS Rule, depending upon what activity you have or are performing, you must provide one or more of the following types of disclosure:
The General Commercial Communications Disclosure: You must include this disclosure when you advertise in any way MARS services that are not directed to a specific consumer. This includes any written material, radio or television commercials, advertisements on the internet, etc.
In print advertisements, the following language must be used: IMPORTANT NOTICE: (Name of company) is not associated with 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 change your loan.
In communications disseminated orally or through audible means, the following language must be used: Before using this service, consider the following information. (Name of company) is not associated with 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 change your loan.
The Consumer-Specific Commercial Communications Disclosure is consumer specific and must be provided at the time the consumer enters into an agreement for MARS. For example, when a consumer walks into your office and enters into an agreement with you for any of the covered activities, you must immediately provide them with this disclosure. In the event that you refer a consumer to someone who will provide them with MARS, you must provide still provide this disclosure and you should do so at the time you make the referral. (NVAR Form K1357 MARS Consumer Specific Disclosure)
The final type of disclosure is the Disclosure When Providing an Offer of Mortgage Relief. This disclosure must be made when the lender provides an offer of mortgage relief to the seller. For example, the disclosure must be provided when the seller receives a short sale approval letter incorporating the offer of mortgage relief. (NVAR Form K1358 MARS Offer of Mortgage Relief Disclosure)
I DONT CHARGE AN ADDITIONAL FEE FOR ASSISTING MY SELLER/BUYER WITH A SHORT SALE TRANSACTION, SO THE MARS RULE WOULD NOT APPLY TO ME, RIGHT?
Wrong. If you have substantive conversations with your client concerning a short sale and/or direct contact with the sellers lender concerning a short sale pre-approval or the negotiation of a short sale contract, you are subject to the MARS Rule regardless of whether or not you charge a fee over and above the agreed upon real estate commission.
A HOUSE I LISTED LAST MONTH IS A SHORT SALE. DO I NEED TO INCLUDE THE DISCLOSURE FORMS?
Yes. The rule went into effect on January 1, 2011, and so if you are providing any advice to the seller concerning their short sale and/or communicating and negotiating a short sale pre- approval or short sale purchase, offer disclosure is required.
WHAT IF THE HOUSE IS ALREADY UNDER CONTRACT, BUT HASNT CLOSED YET? DO I NEED TO GO BACK AND PROVIDE THE DISCLOSURES NOW?
If the sale has already closed, you do not need to make the disclosure. Just be sure to make the appropriate disclosure(s) from this point forward.
BESIDES PROVIDING THE DISCLOSURE, IS THERE ANYTHING ELSE I MUST DO?
Yes. In addition to providing the appropriate disclosure statement(s), you must keep a copy of all contracts between the provider and the consumer, copies of all written communication (including emails and text messages) between the consumer and MARS provider prior to entering into the agreement for MARS services, copies of all document or recordings or any other commercial communications for MARS services, all consumer files containing contact information and descriptions of MARS services for 24 months from the date the record is created.
I REPRESENT THE BUYER IN A SHORT SALE, I DONT HAVE TO WORRY ABOUT THESE DISCLOSURES, RIGHT?
Not necessarily. If you contact the bank in order to help facilitate a deal for a short sale property, you will need to provide the appropriate disclosure, even if you represent the buyer.
WHAT ARE THE PENALTIES FOR NON-COMPLIANCE?
Fines of $11,000 per occurrence and $11,000 per day may be incurred for violations, so it is important that you understand the new regulations and are compliant. In addition, consumers may sue the MARS services provider (broker/agent) if their damages exceed $50,000.
WHERE CAN I READ MORE ABOUT THE MARS RULE DUTIES AND REQUIREMENTS?
The FTC has issued a compliance guide for businesses. It is available for download as a pdf file on the FTC web site. http://business.ftc.gov/documents/bus76-mortgage-assistance-relief-services-rule.
Drafted with the assistance of NVAR, RAAR and VAR.