Posts by "Michelle Lind" http://www.aaronline.com K. Michelle Lind, Esq. is General Counsel/Assistant CEO to the Arizona Association of REALTORS® (AAR). She serves as the primary legal advisor to the association. Michelle oversees AAR’s Risk Management Committee, which includes professional standards administration for twenty of the state’s local REALTOR® associations, and the development of standard real estate forms. She is the author of Arizona Real Estate: A Professional’s Guide to Law & Practice and a regular contributor to Arizona REALTOR® Magazine and the Arizona Journal of Real Estate & Business. Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.

MARS UPDATE: AAR members may have received a copy of the Combs Law Group email regarding MARS. The information in the email was not based on a formal announcement from NAR or the FTC. Last week, NAR Counsel informed me that the FTC agreed that the “Disclosure to Prospective Customers” and the “Disclosures When Presenting a Short Sale Offer” do not work in the short sale context and could be misleading and confusing to consumers. NAR is hoping the FTC will approve the use of alternative or augmented language that will clarify matters. Although NAR indicated that the FTC stated that these two disclosures need not be given at this point, they continue to work with the FTC on written guidance. Therefore, AAR determined that the best course was to wait until NAR published written guidance sanctioned by the FTC before advising the members further. We anticipate receiving additional guidance from NAR and the FTC shortly and we will distribute it to the members as quickly as possible.

Posts by "Michelle Lind" http://www.aaronline.com K. Michelle Lind, Esq. is General Counsel/Assistant CEO to the Arizona Association of REALTORS® (AAR). She serves as the primary legal advisor to the association. Michelle oversees AAR’s Risk Management Committee, which includes professional standards administration for twenty of the state’s local REALTOR® associations, and the development of standard real estate forms. She is the author of Arizona Real Estate: A Professional’s Guide to Law & Practice and a regular contributor to Arizona REALTOR® Magazine and the Arizona Journal of Real Estate & Business. Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.

The Federal Trade Commission (FTC) issued a rule on Mortgage Assistance Relief Services (MARS), which has generated numerous questions.  A plain reading of the rule seems to sweep real estate professionals involved in short sale transactions under the MARS requirements, which include specific disclosures and a prohibition of up-front fees.  However, a footnote in the FTC’s rule commentary states:

126 As a general matter, the Final Rule is not intended to apply to the marketing of services to assist consumers in selling their properties to third parties. The Final Rule, however, does specifically cover the marketing of services involving the sale of properties to third parties if those services are designed or intended to assist consumers in averting foreclosure, e.g., through a short sale or deed-in-lieu of foreclosure. One commenter urged the Commission to exempt licensed real estate professionals from the Final Rule. NAR at 1–2. The commenter argued the Rule would restrict real estate agents in helping consumers with the process of selling their homes through short sales. Id. The Commission concludes that an exemption for real estate agents is not necessary. Real estate agents customarily assist consumers in selling or buying homes and perform functions such as listing homes for sale, showing homes, and finding desirable homes for consumers. The Commission is aware that real estate agents may perform these functions when properties are bought or sold through a short sale transaction, but does not consider these services to be MARS.

AAR sent a request to NAR legal counsel, which was forwarded to the NAR DC regulatory staff, that the issue be further clarified.  Here is a link to the MARS information on NAR’s website.

Posts by "Michelle Lind" http://www.aaronline.com K. Michelle Lind, Esq. is General Counsel/Assistant CEO to the Arizona Association of REALTORS® (AAR). She serves as the primary legal advisor to the association. Michelle oversees AAR’s Risk Management Committee, which includes professional standards administration for twenty of the state’s local REALTOR® associations, and the development of standard real estate forms. She is the author of Arizona Real Estate: A Professional’s Guide to Law & Practice and a regular contributor to Arizona REALTOR® Magazine and the Arizona Journal of Real Estate & Business. Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.

The Risk Management Committee (RMC) will be making a recommendation at the January 21, 2011 Executive Committee meeting for the approval of eight new/revised 2011 forms and request that the release of the all the forms be pushed back to February 28, 2011. The February 28th release date will provide adequate time for our members to familiarize themselves with the changes to forms, including the Residential Purchase Contract (Contract) and new Pre-Qualification (Pre-Qual) and Loan Status Update (LSU) forms. The primary substantive changes to the Contract are concentrated in the financing section.

I will present a webinar that will review the changes to the Contract and give an overview of the new Pre-Qual and LSU forms. In addition to the webinar, AAR will post accompanying educational information, such as sample forms highlighting the exact changes to the Contract, an article and answers to “Frequently Asked Questions.”

Provided that the RMC recommendations are approved, it is AAR’s intention to have the educational materials available on our website no later than Tuesday, January 25, 2011. We will encourage all educators and brokerages to download and view the webinar as a group to help facilitate the learning process.

For additional information, please contact Christina Smalls or Jan Steward.

Posts by "Michelle Lind" http://www.aaronline.com K. Michelle Lind, Esq. is General Counsel/Assistant CEO to the Arizona Association of REALTORS® (AAR). She serves as the primary legal advisor to the association. Michelle oversees AAR’s Risk Management Committee, which includes professional standards administration for twenty of the state’s local REALTOR® associations, and the development of standard real estate forms. She is the author of Arizona Real Estate: A Professional’s Guide to Law & Practice and a regular contributor to Arizona REALTOR® Magazine and the Arizona Journal of Real Estate & Business. Please note that this article is of a general nature and may not be updated or revised for accuracy as statutory or case law changes following the date of first publication. Further, this article reflects only the opinion of the author, is not intended as definitive legal advice and you should not act upon it without seeking independent legal counsel.

The following information comes from the California Association of REALTORS® (CAR) legal e-newsletter, Realegal. CAR has given AAR permission to share the information with our members here in Arizona:

Undisclosed payments in short sale transactions, especially those paid outside of escrow, may violate the law, including RESPA, laws against loan fraud, and licensing laws. Short sale agents have increasingly reported to C.A.R. about requests for agents and their clients to pay junior lienholders and others, oftentimes outside of escrow.

One common scenario is when a short sale seller’s senior lender authorizes a payment of $3,000, for example, to extinguish a junior lien, but the junior lender demands that the buyer pays an additional $9,000 outside of escrow. Not only would it be risky for a buyer to pay outside of escrow, but concealing this additional payment from a federally-insured senior lender may constitute loan fraud, which is a crime punishable by 30 years imprisonment plus a $1 million fine (18 U.S.C. section 1014). Furthermore, omitting from the HUD-1 Statement any charges paid at settlement by either a buyer or seller may violate the Real Estate Settlement Procedures Act (RESPA) (Appendix A to 24 C.F.R. Part 3500). Depending on the specific circumstances, carrying out these payment requests may also violate other laws and regulations, and an agent’s participation in the scheme may be subject to license revocation by the Department of Real Estate or other disciplinary action.

Agents and their clients are encouraged to file any complaints regarding fraudulent activities to the proper authorities, including the following agencies:

*Arizona Attorney General’s Office
Maricopa Co. 602-542-5025 | Pima Co. 520-628-6504 | Other Areas 800-352-8431 http://www.azag.gov/consumer/MailInInstructionsEng.html

Department of Housing and Urban Development (HUD)
HUD Office of Inspector General Hotline (GFI)
800-347-3735

http://www.hud.gov/offices/oig/hotline

Federal Bureau of Investigation (FBI)
202-324-3000
https://tips.fbi.gov

This information was reprinted with permission from CAR. (* The California Attorney General’s contact information was replaced with Arizona’s.) It was originally published in CAR’s Realegal email on March 16, 2010. All rights reserved.