In the mid 90’s there was a lot of talk about a popular book called “Men are from Mars, Women are from Venus”, and it was the topic of many talk shows and conversations. Today, we’re talking about MARS again bit in a different context. Regardless of what planet you’re from, when it comes to negotiating short sales, referring your seller to a negotiator, or utilizing a negotiator for your short sale investment, you better be sure you are MARS compliant.
MARS stands for Mortgage Assistance Relief Services, and is a new FTC (Federal Trade Commission) ruling to protect distressed homeowners from mortgage relief scams. Explaining the ruling, FTC Chairman Jon Leibowitz said, “At a time when many Americans are struggling to pay their mortgages, peddlers of so-called mortgage relief services have taken hundreds of millions of dollars from hundreds of thousands of homeowners without ever delivering results. By banning providers of these services from collecting fees until the customer is satisfied with the results, this rule will protect consumers from being victimized by these scams.”
This ruling not only applies to loan modifications, but also to short sales. 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. If you provide, or arrange for someone else to provide, short sale services, you need to be sure that all documents, correspondence and advertising are in compliance.
Highlights of the Mortgage Assistance Relief Services ruling include:
- Advance fees are outlawed. You may not collect a fee until the homeowner has an offer in writing that they agree to accept.
- Homeowner has the right to reject an offer, and no fees would be charged
- Various disclosures must be included in the initial contact and throughout the process. They need to be in writing. These disclosures are designed to protect the homeowner from being mislead, and help them make better informed decisions. These disclosures include stating you are not associated with the government, and your service has not been approved by the government or their lender.
- Homeowner has the right to stop doing business with the provider at any time, and no fee is involved.
- False or misleading claims are prohibited in advertising or communication about services or performance.
- If you tell the homeowner to stop paying their mortgage, you must also make them aware that they may damage their credit rating, and could lose their home.
As always, the best advice is to have a qualified Real Estate attorney review your documents and marketing, and make sure it complies with the new MARS regulations.
To read the entire ruling go to: http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf or view the FTC’s November MARS press release: FTC Issues Final Rule to Protect Struggling Homeowners from Mortgage Relief Scams