The FTC has recently issued various rules to protect distressed homeowners from mortgage relief scams. The MARS Rule (Mortgage Assistance Relief Services) imposes a ban on advance fees and false advertising on companies involved in MARS related activities.
The typical scam involves a company claiming they can successfully negotiate with a lender to obtain a loan modification or forbearance plan. The company requires a large advance payment from the homeowner, but then does little or no work to avoid the foreclosure. These abuses now include short sales and deeds in lieu of foreclosure. Thus the need for the MARS Rule to protect the consumer.
As a result, any realtor working with Short Sales must now abide by the MARS Rule. There are two new VAR forms which the realtor needs to provide to the Seller. The first form is called “Mortgage Assistance Relief Services Disclosure Consumer-Specific Disclosure” (VAR Form 400 MARS 1). This form must be signed by the Seller whenever it becomes clear that the realtor will be negotiating with the short sale lender. The second form “Mortgage Assistance Relief Services Disclosure Offer of Mortgage Relief” (VAR Form 400 MARS 2) must be signed by the Seller when approval of the short sale by the lender occurs.
The MARS Rule does not effect attorneys negotiating short sales as long as they are licensed to practice law in the state where the consumer or the dwelling is located, and they comply with the relevant state licensing and bar requirements. Advance fees are allowed for attorneys if these fees are held in their attorney’s trust account.
Please contact our firm if you have questions or need legal advice.
Tucker Griffin Barnes P.C.