The Federal Trade Commission says it will exempt real estate brokers and agents assisting clients in obtaining short sales from most provisions of new rules intended to protect consumers from foreclosure rescue scams.
Real estate brokers and agents complained that the "consumer specific" disclosure forms the FTC introduced as part of its Mortgage Assistance Relief Services (MARS) rule were confusing, because they addressed services provided by loan modification companies, not real estate agents.
"You may stop doing business with us at any time," the FTC’s model language for one disclosure reads. "You may accept or reject the offer of mortgage assistance we obtain from your lender (or servicer). If you reject the offer you do not have to pay us. … Even if you accept this offer and use our service, your lender may not agree to change your loan."
The FTC says it will exempt licensed brokers and agents assisting clients with short sales from the disclosure requirements, which took effect Dec. 29, and also from a ban on the collection of upfront fees, which was put in place Jan. 31. Short-sale brokers and agents will continue to be subject to MARS prohibitions against making misrepresentations to clients.
"As a result of the stay on enforcement, these real estate professionals will not have to make several disclosures required by the (MARS rule) that, in the context of assisting with short sales, could be misleading or confuse consumers," the FTC said in announcing the policy. "As more and more American homeowners seek short sales, it is especially important that the (MARS rule) not inadvertently discourage real estate professionals from helping consumers with these types of transactions."
The FTC announced the final MARS rule in November, after bringing more than 30 cases against companies that allegedly made false claims about their ability to negotiate loan modifications, short sales or other foreclosure relief.
When the MARS rule was proposed, the National Association of Realtors expressed concerns that it would have unintended consequences for real estate brokers and agents engaged in short sales and other transactions. But the FTC decided that an explicit exemption for real estate brokers and agents was not necessary.
"Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers," the FTC said in announcing the final rule in November. "The commission is aware that real estate agents may perform these functions when properties are bought or sold through a short-sale transaction, but does not consider these services to be MARS."
But after the rule went into effect, NAR received calls from members who worried that in the process of assisting clients with short sales, they engaged in activities that might make them subject to MARS.
Real estate agents assisting clients with short sales may also discuss their delinquent mortgage situations and their need for assistance with mortgage servicers, and may refer clients to companies that specialize in loan workout solutions, which some worried would make them subject to MARS requirements.
The FTC said the stay on enforcement does not apply to real estate professionals who provide other types of mortgage assistance relief, such as loan modifications, and the FTC said it will continue to enforce prohibitions against unfair and deceptive practices against all other providers of mortgage assistance relief services.