Mortgage Assistance Relief Services Act

Frascona on MARS

Prominent real estate attorney Oliver Frascona doesn't think the MARS rule regarding short sale transactions is as onerous as many think.

Prominent real estate attorney Oliver Frascona has heard all of the wailing from real estate brokers regarding the six-month-old rule known as MARS, but he doesn’t buy it.

Any real estate broker who does short sales, in which a lender accepts less then the mortgage amount, is surely familiar with MARS.

MARS, an acronym for Mortgage Assistance Relief Services Act, went into effect on Jan. 1. A 54-page, single-spaced document such as the Federal Trade Commission’s MARS, addresses a number of topics, of course. But the most significant change is that it makes it illegal for real estate brokers to charge sellers an upfront fee or to pass along a short sale coordinator’s fee on any short sale prior to receiving a written offer from a lender or servicer that the homeowner decides is acceptable.

This is what FTC Chairman Jon Leibowitz had to say about this portion of MARS in February: “Banning the collection of up-front fees will protect homeowners from being victimized. This is especially important at a time when so many people are behind on their mortgages or facing foreclosure.”

Penalties for breaking the rules are stiff – up to fine of $11,000 a day.

But Frascona, a shareholder of the Boulder-based firm Frascona, Joiner, Goodman and Greenstein, PC, said that he does not believe the intent of MARS is to go after brokers who pay small upfront fees to reputable short-sale assistant firms. Studies have shown that brokers who use these short-sale facilitators have a much greater likelihood of completing a short-sale quickly.

Culprits: Out-of-state firms that charge upfront fees

“They’re not going to go after the broker who pays a couple of hundred bucks upfront to a short-sale company that needs the money to cover its overhead,” Frascona told me. “They’re going after the out-of-state guys who charges a bunch of money and didn’t do anything. And they should be going after those guys.” He also said that the FTC rule would apply to real estate brokers who are giving short-sale work to unqualified family members, who are not helping the distressed homeowners.

“They’re not going after Joe Broker who has got a short-sale listing and says I’ll pay a reputable firm to get the process started,” Frascona said. “Unless, I’m missing something, I just don’t see it. The public is not being harmed. The consumer is actually being helped. There is no kickback involved.”

The reality, even if the FTC decided to go after real estate brokers who are paying legitimate firms upfront fees, they couldn’t, he said. “The FTC has the same budget constraints as everybody else,” Frascona said. “There is no way they have the financial resources to go after a reputable broker working with a reputable company, especially when they are helping people at a reasonable cost.”

Not that he is a fan of MARS.

“i don’t think the FTC knew what it was doing,” Frascona said. “It’s like it’s left hand didn’t know what it’s right hand was doing. MARS is a mess.”

To contact or learn more about Oliver Frascona’s law firm, please visit this link to his law firm.