Modifying the orbit of MARS, but not protections for consumers

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Today, the FTC announced it won't enforce most parts of the Mortgage Assistance Relief Services (MARS) Rule against real estate brokers and their agents who help consumers with short sales. A short sale — a phrase consumers have heard a lot recently — is the sale of a home for less than the homeowner owes on the mortgage, and where the bank accepts the sale proceeds instead of foreclosing.

The MARS Rule protects homeowners who are shopping for services to help them avoid foreclosure or lower their mortgage payments. Under today's Enforcement Policy Statement, what parts of the MARS Rule won't be enforced against real estate brokers and their agents? All, except for the ban against misrepresentations. That means that real estate brokers and their agents helping consumers with short sales don't need to make the disclosures required by the Rule and aren't subject to the ban on collecting up-front fees — but they must comply with the FTC's long-standing ban on misleading claims.

A word of warning: A real estate license isn't a free pass from complying with the Rule. The new policy applies only to real estate brokers and their agents who are licensed, in good standing, and complying with state real estate laws. The real estate broker or agent must be helping a homeowner get a short sale as part of a bona fide attempt to sell the home. So licensed real estate brokers and agents still have to comply with all the provisions of the Rule when helping people with loan modifications or with other ways of avoiding foreclosure.

Why the change in policy? It's a matter of responsive government. After the Rule took effect, real estate professionals called the FTC's attention to issues they've encountered in trying to comply with the Rule when they helped consumers with short sales — for example, that the Rule's disclosures may not give consumers the most accurate information about short sales. The FTC responded with this new policy because the Rule wasn't meant to complicate the short sale process. Fortunately, consumer protection still is paramount: Real estate brokers and agents covered by the new policy are subject to Section 5 of the FTC Act, which forbids unfair and deceptive practices.

If your company or your clients are covered by all provisions of the MARS Rule, get a refresher by reading Mortgage Assistance Relief Services Rule: A Compliance Guide for Business.

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