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Understanding the Mortgage Assistance Relief Services Rule

By Beau R. Pichon, Esq.

Late last year, the Federal Trade Commission issued its final Mortgage Assistance
Relief Services (MARS) Rule, which regulates individuals and entities that, for a fee,
assist distressed homeowners with obtaining loan modifications or other types of
mortgage assistance. While the Rule was designed primarily to prevent scam artists from
preying on vulnerable homeowners, REALTORS® who assist sellers in negotiating short
sales are also included under the FTC’s broad definition of “MARS providers.” Even if a
REALTOR® does not directly provide short sale assistance, he will still be considered a
MARS provider if he arranges for, or refers the seller to, someone else to provide that
service. It is imperative, therefore, that any REALTORS® who fit this description be
aware of the new MARS Rule and follow the guidelines provided by the FTC.

There are two main components to the Rule. First, MARS providers are barred from
charging any advance fees to clients. The provider may only be paid once the mortgage
relief sought is actually granted. This prohibition should not affect most REALTORS®
as they typically do not charge any advance fees for short sale assistance. The second
major component of the MARS Rule is the requirement of specific disclosures in several
circumstances. These disclosures are intended to make it clear to clients and prospective
clients that, among other things, the MARS provider is not affiliated with the government
or with the client’s lender, there is no guarantee of success in negotiating with the client’s
lender, and the client may stop working with the MARS provider at any time and will not
have to pay for the provider’s services. All MARS disclosures must be “clear and
prominent,” and written disclosures must be, “at a minimum, the larger of 12-point type
or one-half the size of the largest letter or numeral used in the name of the advertised
website or telephone number to which consumers are referred to receive information
relating to any mortgage assistance relief service.” Additionally, all disclosures must
“be preceded by the heading ‘IMPORTANT NOTICE,’ which must be in bold face font
that is two point-type larger than the font size of the required disclosures.”

There are three different disclosures required under the MARS Rule. The first
disclosure is necessary when a REALTOR® promotes MARS services in a general
advertisement, such as a newspaper ad or on a website. Further disclosure is required
when a MARS provider communicates directly with a specific prospective client, but
before the provider begins work on that client’s behalf. This disclosure must include the
amount, or method for calculating the amount, that the client would pay for the services
provided. While REALTORS® who assist clients with short sales do not usually charge
fees for this service in addition to the real estate commission collected, it would be wise
to reference that commission in this disclosure to avoid the appearance of impropriety.
The third mandatory disclosure must be given when the MARS provider furnishes the
client with a written offer of mortgage assistance relief from the client’s lender (e.g., the
short sale approval letter). This disclosure must also include the payment amount, and
the amount stated must match the amount previously disclosed. Finally, all MARS
disclosures must state that clients who stop making mortgage payments run the risk of
damaging their credit and losing their homes.

While this article outlines the new MARS Rule and its general effect on
REALTORS®, for brevity’s sake it does not provide the full disclosure language
required in each situation. A link to the text of the new MARS Rule and the exact
disclosure language can be found at www.ftc.gov/opa/2010/11/mars.shtm. If you are a
REALTOR® who works with short sale clients, I would encourage you to discuss the
implications of this Rule with your broker, and to seek the advice of an attorney if you
have any further questions.

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