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More Government Support For Short Sales: FTC Exempts Real Estate Agents from MARS Rule

- Saturday, July 16, 2011

The Federal Trade Commission (FTC) issued a press release yesterday indicating that it will exempt real estate brokers and their agents who are assisting distressed homeowners in negotiating a short sale from most of the provisions in their Mortgage Assistance Relief Services (MARS) Rule.

This is yet another in a string of moves to remove unnecessary steps and unwieldy paperwork, and to streamline the short sale process.

The FTC statement ackowledges the growing role of short sales: “As more and more American homeowners seek short sales, it is especially important that the Rule not inadvertently discourage real estate professionals from helping consumers with these types of transactions.”

The MARS rule was issued by Congress in 2009. It was aimed at protecting consumers from foreclosure fraud, for example from people or companies charging up-front fees to negotiate loan-modifications. The final MARS rule came into effect last November, after over 30 cases had been brought forward against against companies for allegedly making false claims about their ability to negotiate foreclosure relief, such as loan modifications or short sales. The Rule requires companies offering mortgage assistance relief services to disclose certain information to consumers about the services they provide, bans collection of advance fees, and prohibits false or misleading claims.

However, many real estate agents were uncomfortable with the wording of this new ruling. They pointed out that the required disclosures could confuse consumers or could be inaccurate in the context of the services they provide.

The FTC agreed, and the new FTC statement exempts licensed real estate brokers and their agents from most of the provisions of the MARS rule. Agents will be exempt from obligations to make disclosures and from the ban on collecting advance fees, but they will remain subject to a ban on making misrepresentations.

This new FTC exemption is one more move by government to make the short sale process simpler and easier. It represents further recognition that short sales are not only good for individual homeowners who are trying to avoid foreclosure, they are also good for the housing market and a step toward economic recovery.

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