RESPA Lawyer Blog

The United States Department of Housing and Urban Development is seeking public comments relating to Section 9: "Required Use" under RESPA. "The Real Estate Settlement Procedures Act (RESPA): Strengthening and Clarifying RESPA's "Required Use" Prohibition Advance Notice of Proposed Rule making" was made public on June, 3, 2010.

HUD appears to be concentrating on home builder owned title and mortgage companies where homebuilders offered construction upgrades or discounts to consumers if the home buyers used their ancillary title or mortgage company. The controversy centered around a few homebuilders who offered consumers free upgrades (i.e. bonus rooms, automobiles, or other extravincentives) if the consumer used the home builders affiliated mortgage or title company. The controversy escalated when some of these free upgrades exceeded tens of thousands of dollars. The cost to use another mortgage or title company did not make sense because the consumer would lose out on the extravagant free upgrade. Some consumers felt like they had to use the home builders affiliated business because the incentive was so excessive they had no choice but to use the homebuilders mortgage company.

The affiliated business model is encouraged by HUD when the consumer saves money but some some felt like the practice that a few homebuilders engaged in did not really save the consumers money on the mortgage side because they claim the interest rates were higher.

HUD appears to be looking at how to clarify the incentive language under "Required Use" so that the incentive offered actually benefits the consumer yet still allows the consumer to shop around.

The comment period ends on September 1, 2010.
All interested parties wishing to submit a comment should direct their comments to:
Regulations Division, Office of General Counsel, Department of Housing and Urban Development, 451 7th Street, SW Room 10276, Washington, D.C. 20410-0500

The U.S. Housing and Urban Development (HUD) made a number of surprising management changes last month including the shuffling of Ivy Jackson, the Director of the Office of RESPA and Interstate Land Sales to the Office of Insured Health Care Facilities. Ivy Jackson's departure took the real estate industry by surprise and created uncertainty for state regulators who were relying on her to educate them the new RESPA regulations this year.

The Sterbcow Law Group would like to thank Ivy Jackson for her contributions over the years at RESPA. She will always be remembered as a federal regulator who was fair to the real estate industry and to consumer interests while at RESPA. Ms. Jackson's work ethic, honesty, and experience will be missed.

HUD promoted Teresa Baker Payne to the position of Assistant Deputy Assistant Secretary and Barton Shapiro was named Acting Director of RESPA and Interstate Land Sales. Ms. Payne and Mr. Shapiro both bring experience to their new positions. Ms.Payne and Mr. Shapiro both are excellent choices for their respective roles at HUD.

Continue reading "RESPA: DEPUTY DIRECTOR IVY JACKSON IS SHUFFLED OUT OF RESPA DIVISION" »

The U.S. Housing and Urban Development's Real Estate Settlement Procedures Act (RESPA) Division released new updated FAQs on Jan. 28, 2010. The new RESPA frequently asked updated question and answers (FAQs) are in bold.

One of the new questions asks whether a loan originator can require the use of its affiliate company for the tax or flood certificate. The updated RESPA guidance says that the loan originator may not require the use of its affiliate for the tax service or flood certificate, but a loan originator may require the use of a non-affiliated provider.

HUD announced today a delay in "HUD ENFORCEMENT" on the new RESPA Rule which goes into effect on Jan. 1st, 2010 on FHA loans. We need to highlight the fact that only HUD Enforcement of the new RESPA rule has been delayed for 120 days on FHA loans. Civil litigation on the new RESPA Rule goes into effect on Jan. 1st, 2010 and therefore is not delayed.

We applaud HUD for delaying enforcement of the new rule for 4 months it still exposes companies that do not implement the new changes to potential civil litigation issues for not complying with the new rule.

Another RESPA attorney said it best: "Better pin on your badge and strap on your gun looks like HUD will look to the plaintiff's bar to bring the heat in the first 4 months."

Below is a copy of the HUD press release:

Continue reading "RESPA: HUD OFFICIALLY DELAYS "HUD ENFORCEMENT" OF NEW RESPA REFORM RULE" »

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.

Continue reading "THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE" »

The Obama Administration is pushing new legislation which would create a financial services regulatory commission. The commission would be called "The Financial Product Safety Commission" and it would regulate all mortgages, credit cards, and mutual funds. The Washington Post's Zachary A. Goldfarb, Binyamin Appelbaum and David Cho wrote an article on May 20, 2009.

The Senate version of this bill under Section 10: Enforcement has some very strong criminal and civil money penalties that could further strengthen consumer protections against businesses. The current senate & house versions of the bill could add considerable consumer protections against loan servicing companies which under Section 6 of RESPA offer consumers very little protection from some mortgage servicing companies abusive practices. This is definitely one of those bills to keep an eye on as the ramifications could be huge for businesses and consumers.

Continue reading "RESPA: THE FINANCIAL PRODUCT SAFETY COMMISSION ACT OF 2009" »

October Research has selected Charles C. Cain to be a speaker at the 2009 National Compliance Summit on February 19-20, 2009 at The Westin Casuarina Las Vegas Hotel, Casino & Spa. Charles Cain is Of Counsel to the Sterbcow Law Group LLC in New Orleans, Louisiana and is President of Alliance Solutions LLC based in Cincinnati, Ohio.

The RESPA Affiliated Business Arrangement (AfBA) Disclosure form is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership or other beneficial interest.

The referring party must provide the AfBA disclosure to the consumer at or prior to the time of referral. The affiliated business arrangement disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges.

Except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.

Continue reading "RESPA's AFFILIATED BUSINESS (AfBA) ARRANGEMENT DISCLOSURE FORM" »