Mortgage Assistance Relief Services (“MARS”) Rule Requirements for Short Sale Brokers

By AAR General Counsel K. Michelle Lind
Posted February 23, 2011; updated July 20, 2011

UPDATE – July 20, 2011 – The Federal Trade Commission has announced that it will not enforce most MARS Rule provisions against Short Sale Brokers and will transfer MARS rule making authority to the Consumer Financial Protection Bureau on July 21, 2011. Read the full article.

You may also be interested in NAR's Q&A podcast with the FTC on the recent FTC non-enforcement policy. 

The Federal Trade Commission (“FTC”) Mortgage Assistance Relief Services (“MARS”) Rule applies to any person that provides, offers to provide, or arranges for others to provide, any “mortgage assistance relief service.” A “mortgage assistance relief service” includes any service, plan, or program, offered or provided in exchange for consideration to assist or attempt to assist the consumer with negotiating, obtaining or arranging a short sale. Thus, despite initial uncertainty about this issue, it is now clear that a broker negotiating a short sale with a lender on behalf of the seller must comply with the MARS Rule.

Not surprisingly, AAR continues to receive inquiries regarding this new Rule. AAR has been diligently working to provide answers. AAR’s Risk Management Committee is meeting to determine if any of the MARS disclosures should be incorporated into AAR’s existing Short Sale forms and to develop any necessary separate MARS disclosure forms. Since this is a federal rule, NAR has been working with the FTC and has published a summary of the Rule. Read the summary online.

The FTC has published The Mortgage Assistance Relief Services Rule: A Compliance Guide for Business (February 2010) (“FTC Guide–), which is available at: http://business.ftc.gov/documents/bus76-mortgage-assistance-relief-services-rule. Every broker involved with short sales should carefully read this FTC Guide.

The FTC Guide states:

THE FOLLOWING IS A SUMMARY OF THE MARS REQUIREMENTS

(1) NO ADVANCE FEES

The Rule contains a prohibition against requesting or receiving any advance payment of any fee or other consideration until the seller has executed a written agreement between the seller and the lender or servicer incorporating the terms of the short sale offer.

The FTC Guide states:

Notably, in Arizona a real estate licensee may not receive additional compensation for negotiating a short sale, unless also licensed as a loan originator by the Arizona Department of Financial Institutions and the requirements of A.R.S. § 32-2155(C) are met. See, ADRE Informational Alert (February 15, 2011) at: www.azre.gov/PublicInfo/Documents/Short_Sale_Negotiator_Regulations.pdf.

The ADRE Informational Alert also states: “[a]ny fee, refundable or non-refundable, that a broker/salesperson requests or receives from a consumer to negotiate, obtain or arrange a short sale, in advance of an executed agreement between the consumer and his or her lender or servicer that incorporates the final terms that the lender or servicer will agree to, violates the advance fee ban described in section 322.5 of the Federal Trade Commission’s MARS Rule.”

(2) DISCLOSURES IN ADVERTISING

The FTC guide states:

The clear and prominent advertising disclosure must state:

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information.”

(3) DISCLOSURES IN COMMUNICATIONS WITH PROSPECTIVE CUSTOMERS

The FTC Guide states:

The clear and prominent disclosure required in every communication with a prospective customer must state:

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information” and, in telephone communications, must be made at the beginning of the call.

(4) TWO SEPARATE DISCLOSURES WHEN PRESENTING A SHORT SALE OFFER FROM THE LENDER OR SERVICER

The FTC Guide states:

The first clear and prominent disclosure must be on a separate written page and state:

The second disclosure the broker must provide is a separate notice from the lender or servicer. The FTC Guide states:

(5) TRUTH IN ADVERTING SERVICES

The Rule contains prohibitions against making certain representations and misrepresentations.

The FTC Guide states:

(6) RECORD-KEEPING AND MONITORING REQUIREMENTS

The Rule requires certain records be retained for at least two years and reasonable steps to ensure employees and independent contractors comply with the Rule. The records that must be retained include: (i) advertising and promotional materials; (ii) sales records; (iii) communications with customers; and (iv) agreements with customers.

In addition to the foregoing, it is a violation of the Rule for a person to provide substantial assistance or support to any mortgage assistance relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates this Rule.

The Attorney General is authorized to bring an action to enforce the Rule. To review the MARS Rule in its entirety, go to www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

In conclusion, the FTC Guide states:

Click here for a “roadmap” to the MARS disclosures and sample disclosure forms.

AAR General Counsel Michelle Lind is a State Bar of Arizona board certified real estate specialist and the author of Arizona Real Estate: A Professional’s Guide to Law and Practice. 

Note: This information is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this information is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.