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Archive for the ‘Short Sales’ Category

Fewer Home Owners Report Equity in Homes

Friday, July 22nd, 2011

DAILY REAL ESTATE NEWS | FRIDAY, JULY 22, 2011

With falling property values, more home owners are reporting being underwater, owing more on their home than it’s currently worth.

One in three home owners — or 33 percent — say that their home is worth less than the amount they still owe on their mortgage, while another 18 percent aren’t even sure if they’re underwater, according to the latest Rasmussen Report of 676 home owners.

Upper-income home owners tend to be more confident about their home’s value than those who earn less, according to the study. Also, investors were found to be more confident than noninvestors about their home’s equity.

Overall, for the second straight month, less than half of home owners — 49 percent — say the value of their home is worth more than the amount they still owe on their mortgage. While that’s up from June’s all-time low of 45 percent, analysts are still concerned.

For comparison, in December 2008, 61 percent of home owners surveyed said they believed their home was worth more than their mortgage. While that number has fallen since, this is the first time the number of home owners believing they had equity in their home stayed below 50 percent for two months in a row.

Source: “Just 49% Say Home Is Worth More Than Mortgage,” Rasmussen Reports (July 21, 2011)

Some MARS Stipulations No Longer Enforced

Tuesday, July 19th, 2011

By: Kristie Franks

The Federal Trade Commission will no longer enforce most provisions set forth in the Mortgage Assistance Relief Services (MARS) Rule, according to a statement released Friday.

The MARS Rule required real estate agents to make several disclosures when assisting distressed homeowners in obtaining short sales from their lenders or servicers.

The rule also banned advance fee collection and prohibited false or misleading statements.

After the Rule was enacted by Congress in 2009, several real estate agents complained that the disclosures often confused homeowners or misled them.

“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 FTC stated.

The MARS Rule required real estate agents to state that they are not associated with the government, nor have their services been approved by the government or the homeowner’s lender; the lender may choose not to alter the homeowner’s loan; and if a company tells a homeowner to stop making mortgage payments, they must warn them that they could lose their home or damage their credit rating.

Real estate agents who are in good standing under state licensing requirements, in compliance with state real estate laws, and assisting homeowners in obtaining short sales are no longer required to provide the MARS disclosures.

These agents may also collect advance fees.

Deceptive practices and false statements will still be prohibited by the FTC.

The FTC’s stay only applies to short sales and does not affect agents providing assistance with other types of relief such as loan modifications.

Forecast: 15 top-performing real estate markets for remainder of 2011

Friday, July 8th, 2011

Despite Q2 uptick, overall home prices expected to dip further by year’s end

BY INMAN NEWS, FRIDAY, JULY 8, 2011.

U.S. home prices rose slightly in the second quarter, but ultimately fell in the first half of the year and are likely to fall further in the second half, according to a report from data and valuation firm Clear Capital, released today.

The firm’s Home Data Index fell 3.2 percent between fourth-quarter 2010 and second-quarter 2011, despite a 0.9 percent increase in the second quarter from the first quarter. Prices are expected to fall another 2.4 percent by year-end. Since June 2010, home prices have fallen 8 percent overall, the report said.

Clear Capital attributed the price declines to downward pressure from high unemployment and a high share of foreclosure sales. Bank-owned properties (REOs) accounted for 31.4 percent of overall sales at the end of the second quarter, a slight dip from 33.1 percent at the end of the first quarter.

“While varying according to each local market, it is unlikely national home prices have reached a true and sustainable bottom,” the report said.

Nonetheless, “it is clear prices have begun to level off and are not exhibiting as much volatility as we’ve seen since the downturn began,” said Alex Villacorta, director of research and analytics at Clear Capital, in a statement.

The Midwest and the West are expected to see the biggest price drops in the second half of the year: 4.1 percent and 4 percent, respectively. The Northeast and the South will stay relatively flat with declines of 0.8 percent and 1.3 percent, respectively.

Of 50 major metro areas, only five are forecast to see home-price gains in the second half of the year: Washington, D.C.; New York; Orlando; Dallas; and San Francisco. Among the 15 markets expected to perform best in the second half of the year, 11 are expected

to see either gains or smaller rates of decline.

The Virginia Beach-Norfolk-Newport News, Va., metro area is expected to see the biggest price drop, down 8.6 percent, among the 15 lowest-performing major markets. Clear Capital predicts nine out of the 15 will either maintain or slow their price declines compared to the first half of 2011.

BofA Reaches Settlement With Investors Over Legacy Countrywide Deals

Thursday, June 30th, 2011

by Carrie Bay

Bank of America has agreed to pay investors $8.5 billion to compensate them for Countrywide’s dealings years before the subprime lender was acquired by BofA.

The company said in a statement Wednesday that the settlement resolves “nearly all” of its repurchase exposure stemming from legacy first-lien residential mortgage-backed securities (RMBS) issued by Countrywide.

The agreement involves 530 trusts, five of which are second-lien trusts, and covers RMBS that carry a total original principal balance of $424 billion.

As part of the settlement, Bank of America has also agreed to implement certain servicing changes, including transferring high-risk loans owned by the trusts to subservicers and paying additional fees to the investors if benchmarked default-servicing timelines are not met.

The company estimates the costs associated with the supplementary servicing obligations to be approximately $400 million, and notes that the agreed upon actions are consistent with the consent orders issued in April by federal regulators.

In addition to the arrangement, which settles claims from 22 private institutional investors and is subject to final court approval, BofA says it will also be making a $5.5 billion provision to address expected loan buyback liability for both GSE and non-GSE exposures in the second quarter.

Bank of America acquired Countrywide, once the largest subprime lender in the country, in July of 2008. The company has paid out billions of dollars to settle lawsuits related to Countrywide’s business prior to the acquisition, including a multi-state settlement involving mandatory modifications and restitution for homeowners with Countrywide loans.

“This is another important step we are taking in the interest of our shareholders to minimize the impact of future economic uncertainty and put legacy issues behind us,” said Brian Moynihan, Bank of America’s CEO. “We will continue to act aggressively, and in the best interest of our shareholders, to clean up the mortgage issues largely stemming from our purchase of Countrywide.”

Bank of America says Wednesday’s settlement will eat into its second-quarter earnings, scheduled for release on July 19. Company officials are advising investors that the bank will report a loss for Q2 in the range of $8.6 billion to $9.1 billion, or 88 cents to 93 cents per share, as opposed to net income of 28 cents to 33 cents per share without the settlement outlay.

Still, financial markets and the investment community see the settlement agreement as a positive. Analysts say it eliminates a serious cloud of uncertainty that’s been hanging over one of the nation’s most prominent financial fixtures.

BofA’s stock price reportedly rose more than 5 percent in pre-market trading and has seen a steady rally throughout the day, with other shares of financials following suit on its coattails.

Fitch Ratings said it views the settlement as a “favorable development,” adding that the recognition of the cost associated with the agreement in the second quarter “decreases future financial uncertainty and considerably reduces the drag on future earnings from this issue.”

Report: Slow Foreclosures and Oversupply Fuel Market Declines

Monday, June 27th, 2011

by Heather Hill Cernoch

Backlogged foreclosures, severe oversupply, and negative equity triggered a further decline in home prices in April, according to the latest RPX Monthly Housing Market Report from Radar Logic.

The New York-based real estate data and analytics company tracks home prices in 25 major metropolitan areas across the country. Its latest index recorded a decline in the composite reading of 5.1 percent in April when compared to April 2010.

“Clearly, the very large supply of homes for sale or potentially for sale is weighing heavily on the market,” said Michael Feder, president and CEO of Radar Logic.

“Perhaps more worrisome,” Feder continued, “is the clearly established discount on distressed properties. Reason would suggest this discount reflects the level at which buyers are comfortable they can achieve a reasonable rate of return. We expect this situation will continue for some time and will deter any truly robust economic recovery.”

Housing expert sees another price plunge

Friday, June 10th, 2011

by Les Christie

NEW YORK (CNNMoney) — In an off-hand remark before cameras and microphones, economist and housing market guru Robert Shiller opined earlier this year that he would not be shocked if there was another 10% to 25% in the nation’s home price plunge — and he’s not backing down from that statement.

At a S&P Housing Summit in New York, Shiller on Thursday reiterated his fears of falling home prices. It’s not a forecast, he said, just a comment on his understanding of housing market trends.

He explained that speculative markets, like stocks or commodities, act like random walks. They go up and down all the time. Housing market direction tends to be more consistent.

“I worry that this is a real and continuing downturn, like in Japan,” Shiller said. “It had a boom in the 1980s that peaked in 1991. Prices declined in the major cities for 15 straight years after that.”

The U.S. housing market is hard to predict because the boom and bust it went through was unique. Shiller has studied historical price data back to the 1890s and found nothing like it.

“This is the biggest housing boom and bust in U.S. history,” he said. “The bubble was unique. “That makes it impossible for statisticians to forecast because they deal with things that repeat themselves. You see a pattern and expect it to repeat.”

It’s even different from the Great Depression, when the home price plunge was at about the same rate. The big difference, however, was that prices of nearly everything else cratered in the 1930s as well — which has not been true during the housing bust.

FTC to Collect $2.2M from Banned Loan Mod Companies

Wednesday, April 13th, 2011

By: Heather Hill Cernoch

The Federal Trade Commission (FTC) reached a settlement this week with two companies and three individuals, who are now banned from the mortgage relief services business and must pay $2.2 million in assets for consumer refunds.

The FTC filed the proposed consent order in the U.S. District Court for the Southern District of Florida.

As part of its efforts to thwart scams targeting homeowners seeking mortgage relief, the FTC alleged in

November 2009 that Kirkland Young LLC and its manager, David Botton, misrepresented themselves as consumer mortgage lenders, servicers, or their affiliates.

According to the FTC, they falsely promised to modify consumers’ loans and make their mortgage payments more affordable. The FTC added Botton’s sister, April Botton Krawiecki, their father, Samy Botton, and Attorney Aid LLC as defendants in December 2009.

The settlement also permanently prohibits these companies and individuals from misleading consumers about financial-related goods and services and bars the defendants from selling or disclosing customers’ personal information.

The FTC did not allege any violations of the Mortgage Assistance Relief Services Rule in this case because the defendants’ claims predated the rule.

The rule bans providers of mortgage foreclosure rescue and loan modification services from collecting fees until homeowners have a written offer from their lender or servicer that they decide is acceptable.

Bank Bailouts in the Black, Watchdog Asks “And the Toxic Mortgages?”

Friday, April 1st, 2011

By: Carrie Bay

The bailout programs used to prop up the nation’s banking system are now in the black. The U.S. Treasury announced this week that the investments it made in banks, beginning in 2008, to prevent the sector from folding under the weight of the financial crisis have now turned a profit.

Three more financial institutions repaid a combined total of $7.4 billion in Troubled Asset Relief Program (TARP) funds Wednesday. With these proceeds, taxpayers have now recovered $251 billion from TARP’s bank programs through repayments, dividends, interest payments, and other income.

That exceeds the original investment Treasury made through those programs ($245 billion) by nearly $6 billion.

“While our overriding objective with TARP was to break the back of the financial crisis and save American jobs, the fact that our investment in banks has also delivered a significant profit for taxpayers is a welcome development,” said Treasury Secretary Tim Geithner.

Treasury says the only outlay which it doesn’t expect to be recovered is funds disbursed for foreclosure prevention programs.

One of Treasury’s harshest critics, TARP Special Inspector General Neil Barofsky, cast his own dark cloud over the program’s proclaimed success, even as his final day in office approached.

Barofsky officially stepped down from his post Wednesday. In an op-ed piece in the New York Times Tuesday, he wrote that while TARP has pushed Wall Street to profitability

again, it has done little to honor the promises made to Main Street.

Barofsky reminded readers of the original intent of TARP, the intent that was put to lawmakers when they voted on the controversial $700 billion program – to buy up toxic mortgages.

“Treasury promised that it would modify those mortgages to assist struggling homeowners. Indeed, the [legislation] expressly directs the department to do just that,” Barofsky wrote.

But, “almost immediately,” Barofsky said, “Treasury’s plan for TARP shifted from the purchase of mortgages to the infusion of hundreds of billions of dollars into the nation’s largest financial institutions, a shift that came with the express promise that it would restore lending.

“Treasury, however, provided the money to banks with no effective policy or effort to compel the extension of credit,” He said. “There were no strings attached: no requirement or even incentive to increase lending to homebuyers, and…not even a request that banks report how they used TARP funds.”

Barofsky continued, “Treasury’s mismanagement of TARP and its disregard for TARP’s Main Street goals…may have so damaged the credibility of the government as a whole that future policy makers may be politically unable to take the necessary steps to save the system the next time a crisis arises.”

Treasury officials say they believe the bank bailouts will ultimately provide a lifetime profit of approximately $20 billion to taxpayers. And with the profit reaped from the banks, TARP as a whole – including foreclosure programs, support for AIG, and the auto industry bailout – will result “in little or no cost to taxpayers,” Treasury said.

Critics of the program, though, aren’t putting much faith in Treasury’s claims. Rep. Patrick McHenry (R-North Carolina) is chairman of the House’s oversight subcommittee on TARP and bailouts.

He told the New York Times, “The estimates have been consistently off and Treasury has consistently changed the metric for success. In the beginning, they weren’t touting payback – they touted effectiveness. Now, they are touting payback but ignoring the moral hazard this program has created.”

Congressional Panel Report Says Foreclosure Mitigation “Largely Failed”

Wednesday, March 16th, 2011

By: Joy Leopold

The final report released on Wednesday by the Congressional Oversight Panel (COP) regarding the programs and uses of money under the Troubled Asset Relief Program (TARP) paid special attention to foreclosure mediation programs, particularly the Home Affordable Modification Program (HAMP).

The panel pointed out that TARP is expected to cost much less than originally expected, and while that is in part due to careful planning and diligent management, it pointed out that “a separate reason for the TARP‘s falling cost is that Treasury‘s foreclosure prevention programs, which could have cost $50 billion, have largely failed to get off the ground. Viewed from this perspective, the TARP will cost less than expected in part because it will accomplish far less than envisioned for American homeowners.”

Because of this, the report says “The TARP is now widely perceived as having restored stability to the financial sector by bailing out Wall Street banks and domestic automotive manufacturers while doing little for the 13.9 million workers who are unemployed, the 2.4 million homeowners who are at immediate risk of foreclosure, or the countless families otherwise struggling to make ends meet.”

The COP report analyzed several foreclosure mitigation efforts that have been implemented since as far back as 2007.

And though all of the efforts were begun with good intentions, the COP’s report made it very clear that none of the programs have been as successful as hoped, mainly because of poor planning, poor regulation, and poor data collection.

After pointing out that the federal government is not an official sponsor of the HOPE NOW alliance, the COP says that while the alliance reports it has modified more than 3 million loans, little information is available about the actual savings the modifications are providing to homeowners.

Of the HOPE for Homeowners program that was established in July 2008, the COP says it “managed to refinance only a handful of loans,” most likely because the program had “poor initial design, lack of flexibility, and … [relied] on voluntary principal write-downs, which lenders were very reluctant to make.”

The report also reiterated the negative sentiment that has surrounded HAMP for months, pointing out the programs failure to meet its initially projected number of modifications.

In addition, the report said HAMP modifications are unstable, due to the large debt burdens and negative equity that many participating homeowners continue to carry.

And while the panel notes that Treasury did implement some basic measures to attempt to address problems with HAMP, the report says, “the panel remained concerned that the choices made by Treasury in terms of program structure, transparency, and data collection did not leave borrowers well served.”

The panel also points out that its suggestions for changes or requests for information from Treasury were largely ignored.

The report says, “In April 2010, the panel recommended that Treasury commit to providing regular and publicly available data reports on all HAMP modifications through the end of their five-year modification period.”

Treasury failed to produce those reports until late January 2011, which the panel complains leaves limited time for any real conclusions from the data to be drawn before HAMP expires.

The COP also repeatedly asked Treasury for characteristics of borrowers who default again despite receiving a HAMP modification. The panel reports that “Treasury has begun to release a limited amount of aggregate data on HAMP redefaults, but despite the panel‘s urging, it has not made public any analysis that identifies borrower characteristics that positively correlate to a higher risk of redefault.”

The COP requested that the Treasury announce firmer goals for HAMP, specifically how many foreclosures the agency expects HAMP to prevent, but “To date, Treasury has not released any goals or estimates for how many foreclosures will be ultimately prevented by HAMP since its original goal of 3 to 4 million.”

Also, “The Panel repeatedly urged Treasury to improve and streamline communications with borrowers, and to make it easier for them to apply for HAMP assistance,” but, “Treasury did not implement this recommendation.”

The report goes on to list numerous other instances in which suggestions by the COP were ignored. It concludes the analysis of foreclosure mitigation with a section that suggests learning from mistakes made and implementing future policy that takes into account the many factors that go into successfully preventing enough foreclosures to have an impact on the struggling economy.

“Future policymakers should be mindful that the incentives of mortgage servicers are different from those of the government, and design any foreclosure mitigation program with that reality in mind,” it said

MARS Summary and Road Map to Disclosures – By AAR General Counsel K. Michelle Lind

Thursday, March 3rd, 2011

The Federal Trade Commission (“FTC”) Mortgage Assistance Relief Services (“MARS”) Rule applies to any person that provides, offers to provide, or arranges for others to provide, any “mortgage assistance relief service.” A “mortgage assistance relief service” includes any service, plan, or program, offered or provided in exchange for consideration to assist or attempt to assist the consumer with negotiating, obtaining or arranging a short sale. Thus, despite initial uncertainty about this issue, it is now clear that a broker negotiating a short sale with a lender on behalf of the seller must comply with the MARS Rule.

 Not surprisingly, AAR continues to receive inquiries regarding this new Rule. AAR has been diligently working to provide answers. AAR’s Risk Management Committee is meeting to determine if any of the MARS disclosures should be incorporated into AAR’s existing Short Sale forms and to develop any necessary separate MARS disclosure forms. Since this is a federal rule, NAR has been working with the FTC and has published a summary of the Rule. Read the summary online.

 The FTC has published The Mortgage Assistance Relief Services Rule: A Compliance Guide for Business (February 2010) (“FTC Guide–), which is available at: http://business.ftc.gov/documents/bus76-mortgage-assistance-relief-services-rule. Every broker involved with short sales should carefully read this FTC Guide.

 The FTC Guide states:

  • Real Estate Agents. The Rule covers real estate agents who promote their services as a way to help consumers to avoid foreclosure, for example, by getting a lender’s approval for a short sale. However, the Rule doesn’t cover real estate agents who don’t promote their services this way, and who only provide services to help people in buying or selling homes — like listing homes for sale, showing homes, or finding homes that meet buyers’ needs.

 THE FOLLOWING IS A SUMMARY OF THE MARS REQUIREMENTS

 (1) NO ADVANCE FEES

The Rule contains a prohibition against requesting or receiving any advance payment of any fee or other consideration until the seller has executed a written agreement between the seller and the lender or servicer incorporating the terms of the short sale offer.

 The FTC Guide states:

You can’t collect any fees for intermediate steps you take as part of the process. For example, it would be illegal to charge separately for:

  • conducting an initial consultation with a customer;
  • reviewing or auditing a customer’s mortgage or foreclosure documents to detect errors, including “robo signing” or title problems;
  • gathering financial or other information from a customer;
  • sending an application for mortgage relief or any other request to a customer’s lender or servicer;
  • communicating with a lender or servicer on a customer’s behalf; or
  • responding to requests for information from a customer’s lender or servicer.

Notably, in Arizona a real estate licensee may not receive additional compensation for negotiating a short sale, unless also licensed as a loan originator by the Arizona Department of Financial Institutions and the requirements of A.R.S. § 32-2155(C) are met. See, ADRE Informational Alert (February 15, 2011) at: www.azre.gov/PublicInfo/Documents/Short_Sale_Negotiator_Regulations.pdf.

 The ADRE Informational Alert also states: “[a]ny fee, refundable or non-refundable, that a broker/salesperson requests or receives from a consumer to negotiate, obtain or arrange a short sale, in advance of an executed agreement between the consumer and his or her lender or servicer that incorporates the final terms that the lender or servicer will agree to, violates the advance fee ban described in section 322.5 of the Federal Trade Commission’s MARS Rule.”

 (2) DISCLOSURES IN ADVERTISING

The FTC guide states:

The Rule requires certain disclosures in what it calls “general commercial communications” — that is, advertising meant for a general audience, like ads on TV, radio, or the Internet.

The clear and prominent advertising disclosure must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): (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 the broker represents that the seller should stop making payments add: "If you stop paying your mortgage, you could lose your home and damage your credit rating"]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information.”

(3) DISCLOSURES IN COMMUNICATIONS WITH PROSPECTIVE CUSTOMERS

The FTC Guide states:

The Rule requires additional disclosures in any “consumer-specific commercial communication” — that is, a letter, phone call, email, text, or the like, directed at a specific person you’re soliciting for your service.

The clear and prominent disclosure required in every communication with a prospective customer must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (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 the broker represents that the seller should stop making payments add: &8220;If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information” and, in telephone communications, must be made at the beginning of the call.

 (4) TWO SEPARATE DISCLOSURES WHEN PRESENTING A SHORT SALE OFFER FROM THE LENDER OR SERVICER

The FTC Guide states:

Under the Rule, when you give a customer an offer of mortgage relief from their lender or servicer, you have additional disclosure requirements…

The first clear and prominent disclosure must be on a separate written page and state:

IMPORTANT NOTICE: Before buying this service, consider the following information (in two-point type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

The second disclosure the broker must provide is a separate notice from the lender or servicer. The FTC Guide states:

You have to give your customer a separate one-page written notice from the customer’s lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan.

(5) TRUTH IN ADVERTING SERVICES

The Rule contains prohibitions against making certain representations and misrepresentations.

 The FTC Guide states:

Under the Rule, it’s illegal to misrepresent, either expressly or by implication, any “material aspect” of your services. That includes any information that’s likely to affect a consumer’s decision to use your service or choose one service over another. [Examples Omitted]…

 In addition, if you make claims about the benefits, performance, or efficacy of your services, your statements must be truthful and you must have competent and reliable evidence to back them up. [Examples Omitted]…

 Beyond requiring that your claims are truthful, the Rule makes it illegal to tell a customer or potential customer to stop communicating with their lender or servicer.

 (6) RECORD-KEEPING AND MONITORING REQUIREMENTS

The Rule requires certain records be retained for at least two years and reasonable steps to ensure employees and independent contractors comply with the Rule. The records that must be retained include: (i) advertising and promotional materials; (ii) sales records; (iii) communications with customers; and (iv) agreements with customers.

 In addition to the foregoing, it is a violation of the Rule for a person to provide substantial assistance or support to any mortgage assistance relief service provider when that person knows or consciously avoids knowing that the provider is engaged in any act or practice that violates this Rule.

 The Attorney General is authorized to bring an action to enforce the Rule. To review the MARS Rule in its entirety, go to www.ftc.gov/os/fedreg/2010/december/R911003mars.pdf

 In conclusion, the FTC Guide states:

Questions about the MARS Rule? Contact:

Division of Financial Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, DC 20580
(202) 326-3224

 Disclosure #1: ADVERTISING

The Rule requires disclosures in “general commercial communications,” such as advertising short sale services. The clear and prominent advertising disclosure must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): (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 the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information.”

Disclosure #2: COMMUNICATIONS WITH PROSPECTIVE CUSTOMERS

The Rule requires additional disclosures in any “consumer-specific commercial communication,” such as communication with a specific prospective client regarding a short sale transaction. The clear and prominent disclosure required in every communication with a prospective client must state:

IMPORTANT NOTICE (in two-point type larger than the font size of the disclosure): You may stop doing business with us at any time. You may accept or reject the offer of mortgage assistance we obtain from your lender [or servicer]. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us (insert amount or method for calculating the amount) for our services. (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 the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

Communications disseminated orally or through audible means must be preceded by the statement “Before using this service, consider the following information” and, in telephone communications, must be made at the beginning of the call.

 Disclosure #3: WHEN PRESENTING A SHORT SALE OFFER FROM THE LENDER OR SERVICER

When presenting the seller with the lender’s short sale approval letter, the Rule requires two disclosures.

The first is a clear and prominent disclosure on a separate written page that states:

IMPORTANT NOTICE: Before buying this service, consider the following information (in two-point type larger than the font size of the disclosure): This is an offer of mortgage assistance we obtained from your lender [or servicer].You may accept or reject the offer. If you reject the offer, you do not have to pay us. If you accept the offer, you will have to pay us [same amount as disclosed previously] for our services. [If the broker represents that the seller should stop making payments add: “If you stop paying your mortgage, you could lose your home and damage your credit rating”]

The second disclosure the broker must provide is a separate notice from the lender or servicer that explains all material differences between the offer of mortgage relief you got from the lender or servicer and the customer’s current loan.

Sample Disclosure Forms

AAR has developed sample MARS disclosure forms (Microsoft Word), which can be downloaded from the links below:

Please consult your designated broker or independent legal counsel about the use of the sample forms.

Additional Information

 For Answers to Questions about the MARS Rule

Division of Financial Practices
Bureau of Consumer Protection
Federal Trade Commission
Washington, DC 20580
(202) 326-3224