New FTC Rule Impacts Realtors' Short Sale Business

The Mortgage Assistance Relief Services (MARS) rule, which applies to residential real estate transactions, took effect January 31.


http://www.ftc.gov/opa/2011/02/mars.shtm


As of January 31, 2011, companies that offer to help homeowners get their loans modified or sell them other types of mortgage assistance relief services are no longer allowed to charge up-front fees. Under the rule, a mortgage assistance relief company may not collect a fee until the consumer has signed a written agreement with the lender that includes the relief obtained by the company. When the company presents the consumer with that relief, it must inform the consumer, in writing, that the consumer can reject the offer without obligation and, if the consumer accepts, the total fee due. Before the consumer agrees to accept the mortgage relief, the company must also provide a written notice from the lender or servicer showing how the relief will change the terms of the consumer’s loan (including any limitations on a trial loan modification).

Attorney exemption

Attorneys are generally exempt from the rule if they provide mortgage assistance relief services as part of the practice of law, are licensed in the state where the consumer or dwelling is located, and comply with state laws and regulations governing attorney conduct related to the rule. To be exempt from the advance fee ban, attorneys must also place any advance fees they collect in a client trust account and abide by state laws and regulations covering such accounts. Flat Fee Cases are not advance fees.

Realtors must comply with the rule by not taking upfront fees and using specific disclosure language. The rule pertains to such practices as 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.

A real estate professional now needs to include a clear and prominent disclosure in all commercial messages that advertise short sale services. In addition, second and third disclosures are required by real estate professionals before they begin mortgage assistance services on their clients’ behalf and at the time they present their client with the lender’s short sale approval letter.

Why you are better off with a Bankruptcy then a Short Sale

Waiting periods for new home loans with Fannie Mae:



--Bankruptcy, Chapter 7 or 11 — four years; two years with extenuating circumstances.


--Bankruptcy, Chapter 13 — two years from discharge date or four years from dismissal date; with extenuating circumstances, two years from discharge date or two years from dismissal date.


--Multiple bankruptcy filings — five years if more than one filing within the past seven years; with extenuating circumstances, three years from the most recent discharge or dismissal date.


--Foreclosure — seven years; with extenuating circumstances, three years. Additional requirements after three years and up to seven years include a 90 percent loan-to-value ratio, and the loan must be a purchase of a principal residence.


--Deed in lieu of foreclosure — two years, 80 percent maximum loan-to-value ratio; with extenuating circumstances, two years, 90 percent maximum LTV.


--Preforeclosure sale — four years, 90 percent maximum LTV; with extenuating circumstances, two years, 90 percent maximum LTV.


--Short sale — seven years, LTV ratios per the eligibility matrix; with extenuating circumstances, two years, 90 percent maximum LTV.



http://www.heraldtribune.com/article/20110312/ARTICLE/110319877/2107/BUSINESS&tc=email_newsletter
 
 
 
By the way your still open for a deficency and a second lawsuit to collect after the foreclosure, deed in lieu or short sale, unless the bank agrees to waive the deficency.   Which they  almost never do.