Any real estate agent who negotiates short sales with lenders or promotes their services as a way to help consumers avoid foreclosure is covered by the new Federal Mortgage Assistance Relief Services (“MARS”) rules, and must comply with all requirements regarding mandatory disclosures, misrepresentations and the prohibition against collection of advance fees.  [16 CFR 322 et. seq.]

SCOPE:  The Federal Trade Commission recently enacted guidelines governing the activities of persons offering mortgage assistance relief services to homeowners.  The MARS rules apply to any real estate agent who negotiates a short sale with a lender on a residential dwelling (1-4 units).  Agents who promote their services as a way to help consumers avoid foreclosure are also covered.  Other mortgage assistance relief services that are within the scope of the new MARS rules include negotiating, obtaining, or arranging a loan modification, deed-in-lieu of foreclosure, loan forbearance, or postponing a trustee sale. 
 However, the MARS rules do not apply to real estate agents who limit their short sale services to assisting consumers in selling or buying short sales, such as listing homes for sale, showing homes, and finding desirable homes for consumers, as long as those agents do not negotiate with lenders and do not promote their services as a way to help homeowners avoid foreclosure.  If a real estate agent takes an active role in submitting the seller’s short sale package to the lender, negotiates with the lender on the seller’s behalf, or negotiates or arranges for a postponement of a foreclosure sale, then that agent must comply with MARS.
 REQUIREMENTS
 1.  Advertising Disclosure. A real estate professional that advertises MARS services to the general public must include in all advertisements a clear and prominent disclosure stating:
 IMPORTANT NOTICE: (Name of company) is not associated with the government, and our service is not approved by the government or your lender. Even if you accept this offer and use our service, your lender may not agree to change your loan. If you stop paying your mortgage, you could lose your home and damage your credit rating.
 2.  Short Sale Listing Disclosure.  At the time of taking a short sale listing, or whenever the agent becomes aware it will be a short sale, certain disclosures to the seller are required.  The disclosures are set forth in a new CAR form MARS Short Sale Negotiation Notice (MARSSN 3/11) as follows:
    IMPORTANT NOTICE:
1. You may stop doing business with us at any time.
2. You may accept or reject the offer of mortgage assistance we obtain from your   lender   (or servicer).
3. If you reject the offer, you do not have to pay us.
4. If you accept the offer, you will have to pay us (insert amount or method
 for calculating the amount) for our services.
5. (name of company/broker) is not associated with the
government, and our service is not approved by the government or your lender.
6. Even if you accept this offer and use our service, your lender may not agree to change your loan.
 7. If you stop paying your mortgage, you could lose your home and damage your credit rating.
3.  Short Sale Approval Disclosure.  When the listing agent provides the seller with a short sale approval letter from the lender, certain disclosures to the seller are required.  The disclosures are set forth in a new CAR Form:  MARS Offer of Mortgage Relief Notice (MARSMRN 3/11) as follows:
 IMPORTANT NOTICE: Before buying this service, consider the following information:
1. This is an offer of mortgage assistance we obtained from your lender (or servicer).
2. You may accept or reject the offer.
3. If you reject the offer, you do not have to pay us.
4. If you accept the offer, you will have to pay us __________ (insert same amount as in MARSSN), for our services.
5. If you stop paying your mortgage, you could lose your home and damage your credit rating.
 4.  No Misrepresentations.  The MARS rules prohibit a mortgage assistance service provider from doing any of the following:
a. Representing that the consumer cannot or should not contact or communicate with their lender or servicer;
b. Misrepresenting the likelihood of negotiating, obtaining, or arranging any represented MARS service or result;
c. Misrepresenting the amount of time it will take the MARS provider to accomplish the service or result;
d. Misrepresenting that a MARS service is affiliated with or endorsed by the government, nonprofit organization, lender, or any individual;
e. Misrepresenting the consumer’s obligation to make periodic payments to their lender;
f. Misrepresenting the terms or conditions of the consumer’s loan or any refund, cancellation, or exchange of any MARS service;
g. Misrepresenting that a MARS provider has completed their services or has a right to receive payment;
h. Misrepresenting that a consumer will receive legal representation;
i. Misrepresenting the availability of alternative MARS providers;
j. Misrepresenting the amount of money or percentage of debt amount a consumer can save via the MARS service;
k. Misrepresenting the total cost to purchase the MARS service; or
l. Misrepresenting the terms and conditions of any offer of mortgage assistance relief obtained from the dwelling loan servicer.
 5.  No Advance Fees.  The MARS rules prohibit the collection of any advance fees before the mortgage assistance services have been completed.
 6.  Warning Before Stopping Payments.   If you advise someone not to pay his or her mortgage, you must clearly and prominently warn them, that failure to pay could result in the loss of their home or damage to their credit rating.
7.  Record Keeping.  MARS providers must retain all advertisements, sales records, contracts, communications and files for MARS covered services for 24 months.
Brokers must ensure their agents comply with all MARS rules.  Persons who are not MARS providers are also prohibited from assisting a MARS provider when that person knows or consciously avoids knowing that the MARS provider is breaking the MARS rules.
ANALYSIS:  The MARS rules took full effect on January 31, 2011 but the FTC is still in the process of making further revisions.  Revisions appear necessary because some of the required disclosures are misleading.  For example a seller who has signed a listing agreement is not free to “stop doing business with us at any time” without breaching the terms of the listing agreement and perhaps also breaching the contract with the buyer. However the short sale contingency usually gives the seller the right to cancel without breach.
 Even though the disclosures and CAR forms that have been published to date may be revised in the near future, we recommend making these disclosures and using these forms now, in a good faith effort to comply with the law. 
The full text of the final rule is available at:
 http://www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf