A rule enacted to protect consumers from unscrupulous loan modification firms won’t be enforced against real estate agents and brokers in short-sale transactions.
The Mortgage Assistance Relief Services Rule was issued in 2009 in response to a rash of loan modification firms that promised to negotiate better loan terms or short sales with mortgage servicers. The firms often required up-front fees.
But the rule could wind up hindering short-sale transactions.
So the Federal Trade Commission said Friday that it will not enforce most provisions of the MARS rule against real estate professionals who meet certain requirements.
The agency made the decision to grant the exemption after hearing from professionals that borrowers could be confused from some of the disclosures required by the rule. In addition, the disclosures could be inaccurate in short-sale deals involving a Realtor.
Among the exempted requirements are several required disclosures “that, in the context of assisting with short sales, could be misleading or confuse consumers,” the FTC said. Also exempted is the ban of up-front fees.
In order to qualify for exemption from the rule, the real estate agents and brokers must be licensed and in good standing. They also need to comply with state laws and assist, or attempt to assist, borrowers in obtaining short sales while in the process of selling their properties.
But all of the rule’s requirements do apply to real estate professionals who provide loan modification services.
“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 statement said.
