HUD seeking comments on RESPA’s “required use” definition
WASHINGTON – March 9, 2009 – The U.S. Department of Housing and Urban Development (HUD) announced on Friday that it intends to seek further public comment on how to define the scope of a prohibited practice called “required use” under the Real Estate Settlement Procedures Act (RESPA).
In announcing a new public comment period, HUD also said it would delay the planned implementation of RESPA’s “required use” provision for 90 days until July 16. At issue: Whether HUD should withdraw its new “required use” definition originally slated to take effect in January.
The definition of “required use” affects Section 8 RESPA violations – “Prohibitions Against Kick-Backs and Unearned Fees” – and its implementing rule. A “required use” occurs when a client must use a specific provider of settlement services. The new rule makes it clear that a “required use” occurs not only when there is an economic incentive to do so, but also if there’s some kind of disincentive; both are considered “equally problematic” under RESPA. The new definition does not ban legitimate discounts, however.
HUD decided to delay the rule and invite public comment following a legal challenge by the National Association of Home Builders.
HUD says that it believes some businesses use the affiliated business arrangement exception under Section 8 of RESPA to steer consumers to affiliated settlement service providers that may not provide the best mortgage products or settlement services. A number of those complaints concern builders, who are in a position to refer settlement service business to their affiliated mortgage and title companies.
For more RESPA information, visit HUD’s Web site at:
http://www.hud.gov/offices/hsg/sfh/res/respamor.cfm.
To read HUD’s latest RESPA release and download the rule change information (PDF format) that includes mailing addresses and submission information, go to:
http://www.hud.gov/utilities/intercept.cfm?/news/requireduserule.pdf © 2009 FLORIDA ASSOCIATION OF REALTORS®
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