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Thursday, February 10, 2011

New FTC Ruling Prohibits Collecting Advance Short Sale Fees

As our industry continually evolves, new regulations are appearing at warp speed, which are designed to protect the consumer. Unfortunately, some of these new rules make it even more challenging for Realtors to make a living. The most recent FTC ruling with regard to the Mortgage Assistance Relief Services further prevents real estate consultants from being compensated in advance for additional services, when there is a short sale involved. The ruling does not prohibit Realtors from being compensated, however, we may not collect the fee in advance of a purchase agreement and acceptable approval from the 3rd party lender. If the conditions of the approval are not satisfactory to the home seller, they have no obligation to pay us. This ruling has come about due to the large number of fraudulent companies claiming to help consumers modify their mortgages only to not deliver after taking a fee. Because we are involved in the negotiation of the short sale, we are limited by this new regulation even though we are not licensed in mortgages. The following disclosure language must accompany any agreement to pay a specific fee for short sale 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. 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."

At which time there is an acceptable offer that the seller has signed, that has also been approved by the lender, and is acceptable to the homeowner, you may receive the fee. We do not have to wait until closing to receive the fee, only approval and acceptance by all parties.

For further information, you may view the MAR Legal opinion Here.

What are your thoughts???

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