On July 15, 2011, the National Association of REALTORS® (NAR) issued a press release stating that the Federal Trade Commission (FTC) will not undertake enforcement actions against real estate professionals who assist distressed homeowners in their attempts to consummate a short sale transaction. Click here for NAR’s press release. This release is a result of NAR meetings with FTC about the unintended consequences of discouraging short sales with disclosures that are confusing or misconstrued by distressed homeowners. For now, FTC will not enforce the disclosure requirements or the ban on advance fees against real estate professionals who meet certain criteria. It is important to note the following with regard to this forbearance:
FTC says in its statement that it will not take any enforcement action against real estate brokers/agents who are:
- “licensed and maintain good standing pursuant to any applicable state law requirements;
- in compliance with state laws governing the practices of real estate professionals; and (emphasis added)
- assisting or attempting to assist a consumer in negotiating, obtaining or arranging a short sale of a dwelling in the course of securing the sale of the consumer’s home.”
FTC will continue to enforce the FTC Act and MARS Rules that prohibit deceptive practices and will continue to enforce the FTC Act and MARS Rules if the real estate agent is providing other MARS services (i.e. loan modification and not assisting with a short sale).
FTC’s oversight of MARS Rules transfers to the newly created Consumer Financial Protection Bureau (CFPB) on July 21, 2011 so this new agency will determine “whether any modification of the MARS rule is warranted with respect to real estate professionals who assist a consumer in negotiating or obtaining a short sale.” [FTC statement on MARS Rule: http://ftc.gov/opa/2011/07/mars.shtm] It is not known what CFPB’s position will be on either modification of the MARS Rules or enforcement of the MARS rules as written. NAR also notes that State Attorneys General would still have authority to enforce “the Rules as written” but as a “practical matter” NAR believes the enforcement in the circumstances outlined above should end.
FTC makes no specific mention with regard to Rules Section 322.6 regarding knowingly or consciously avoiding knowing whether another MARS provider is complying with MARS rules. Real estate professionals should still be cautious when referring consumers to MARS providers. Stay tuned for further information on this subject.