I suppose it's a nice thing when you are told that you no longer have to do something that you were supposed to do even if you weren't doing it anyway. That is what has happened to real estate brokers and agents this past week. Specifically, on July 15 the Federal Trade Commission (FTC) announced on its web site that it had "issued a statement announcing that it will forbear enforcing most provisions of its Mortgage Assistance Relief Services (MARS) Rule against real estate brokers and their agents who assist financially distressed consumers in obtaining short sales from their lenders or servicers."

The announcement went on to say, "As a result of the stay on enforcement, these real estate professionals will not have to make several disclosures required by the Rule that, in the context of assisting with short sales, could be misleading or confuse consumers. 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 problem was that the MARS disclosures did not make a lot of sense when applied to the context of a brokerage attempting to bring about a short sale. While, to be sure, they were perfectly understandable when applied to an entity attempting to negotiate a loan modification.

When a loan modification was offered, the disclosure rule required a statement that the consumer did not have to accept the proposal and that they did not have to pay the negotiating entity. But this statement caused confusion in the short sale context. Many understood it to mean that, if a particular short sale approval was not satisfactory, that would entitle the seller to cancel the listing. No one really had had this in mind.

Members of the National Association of Realtors® (NAR) Legal Department spent a considerable amount of time working with FTC staff attempting to resolve the ambiguities and unclarity that resulted from grafting rules designed for a loan-modification environment onto the brokerage sale context. A measure of the difficulties encountered was seen in the fact that FTC staff cancelled their scheduled appearance at the May meeting of NAR directors in Washington, DC.

Meanwhile, as noted in a June 7, 2011 article on these pages, hardly anyone in the real estate community was doing the disclosures as required. Now, the FTC has "backed off" from enforcement of the rules vis-à-vis the legitimate brokerage of short sales. (Illegal and/or deceptive practices will still be punished.) This would seem to be good news – one less thing to worry about, even if not many had seemed very worried anyway.

But any sense of relief may be short-lived. The FTC announcement notes that, "…on July 21, 2011 the Commission's rulemaking authority with respect to the MARS Rule will transfer to the Consumer Financial Protection Bureau (CFPB). Thus, the CFPB will have the authority to 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."

Right now, Congressional approval of a new (first-time) director of the CFPB is a sensitive political issue. But someday, someone (or ones) will be approved and there will be a new sheriff in town. Then, only time will tell as to what new disclosure rules may apply.

Published: August 2, 2011

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Bob Hunt is a former director of the National Association of Realtors and is author of the recently published book, "Real Estate the Ethical Way." A graduate of Princeton with a master's degree from UCLA in philosophy, Hunt has served as a U.S. Marine, Realtor association president in South Orange County, and director of the California Association of Realtors, and is an award-winning Realtor. Contact Bob at .