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New FTC Rule Impacts Realtors®’ Short Sale Business

WASHINGTON, DC – May 12, 2011 – (RealEstateRama) — A new rule from the Federal Trade Commission that aims to protect home owners from mortgage relief scams may impact real estate professionals who represent clients involved in short sale transactions. Several hundred Realtors® learned more about the new rule and its impact on their business at the “Risk Management and License Law Forum” during the Realtors® 2011 Midyear Legislative Meetings & Trade Expo in Washington, D.C. today.

National Association of Realtors® General Counsel Laurie Janik overviewed the FTC’s Mortgage Assistance Relief Services rule, which took effect on January 31, 2011. The goal of the rule is to protect distressed home owners from mortgage relief scams and ensure that people who provide counseling, advice and other services to troubled home owners are indeed providing a benefit for the fees they charge. The rule bans all upfront fees for renegotiating mortgage terms and mandates that certain disclosures are made to consumers if a short sale is negotiated with a lender on their behalf or when advertising short sales experience.

“As the leading advocate for home ownership, NAR supports efforts to ensure that mortgage assistance relief services truly benefit consumers,” said Janik. “Nevertheless, NAR has some concerns about the rule and its application to real estate professionals involved in short sales transactions. We are working closely with the FTC to clarify several aspects of the rule in relation to real estate professionals when they are performing traditional real estate functions in a short sale transaction.”

The rule is primarily directed at companies that offer loan modification services to consumers, but it also may impact real estate professionals who represent clients involved in a short sale transaction, especially when advertising short sale negotiation services or other short sale expertise; communicating with a consumer about a possible short sale before the listing agreement is executed; negotiating a short sale on behalf of a consumer; or arranging a short sale negotiation for a consumer. The rule only applies to residential real estate transactions.

In the meantime, Realtors® must already be complying with the rule by not taking any upfront fees and using specific disclosure language. The rule necessitates when and how the disclosures must be presented to consumers and that they are made clearly.

Currently, there are three types of disclosures that a real estate professional may need to make to consumers. First, a real estate professional now needs to include a clear and prominent disclosure in all commercial messages that advertise their short sale services.

Second and third disclosures are required by real estate professionals before they begin mortgage assistance services on their client’s behalf and at the time they present their client with the lender’s short sale approval letter.

“NAR is discussing with the FTC some language in the second and third disclosures and well as some other requirements found in the MARS rule. The FTC is considering possible options to help make the rule more applicable to a real estate brokerage,” said Janik.

For additional information and updates on the MARS rule, visit

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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Information about NAR is available at This and other news releases are posted in the News Media section.

Sara Wiskerchen 202/383-1013