A little too Late…crash happened! HUD reconsiders RESPA rule on incentives

Now if “steering” was involved…

WASHINGTON – June 4, 2010 – The U.S. Department of Housing and Urban Development (HUD) is taking a closer look at the Real Estate Settlement Procedures Act’s (RESPA) prohibition against the “required use” of affiliated settlement service providers. DinSFLA: They need to take a closer look if these were part of “Appraisal Fraud” & “Illegal Kickbacks”.

It violates RESPA if a consumer is required to use a particular mortgage lender, title company or other settlement service provider that’s affiliated with another business in their mortgage transaction. However, it’s less clear whether it’s a RESPA violation if it is offered as a discount or other incentive to steer them to a lender, title company, etc. DinSFLA: COERCION or not COERCE is the Question! I wonder what they would think of the Mills using their own title companies to close on their foreclosures? Any violations?

HUD is currently trying to determine if incentives violate the “required use” requirement. As part of the process, HUD published a notice about the issue and is seeking public comment.

HUD took the step because it has received a number of consumer complaints, many of which focused on a home builder that might reduce the cost of a home (by adding free construction upgrades or by discounting the home price) if the homebuyer uses the developer or builder’s affiliated mortgage lender. In some cases, the incentives may not represent true discounts if the homebuyers ultimately pay more in total loan costs.

According to HUD, consumers also say that the timing of the contract with the builder precludes them from shopping around, and the builder’s lender can then charge higher settlement costs or interest rates not competitive with non-affiliated lenders. HUD says that the steering of clients ” effectively violates” the “required use” ban in RESPA.

“It is our intent to keep an open mind on how to approach this vexing question over what is, and what is not, ‘required use,'” says David Stevens, HUD’s Assistant Secretary for Housing/Federal Housing Commissioner. “Clearly, consumers are complaining that they are being presented offers they believe they can’t refuse, and are essentially being required to use certain affiliated service providers.”

HUD’s current definition of “required use” reads:

“Required use means a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service. However, the offering of a package or (combination of settlement services) or the offering of discounts or rebates to consumers for the purchase of multiple settlement services does not constitute a required use. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices that are otherwise generally available, and must not be made up by higher costs elsewhere in the settlement process.”

HUD’s call for comments is published in the Federal Register. To view the document (PDF format), go to:http://edocket.access.gpo.gov/2010/pdf/2010-13350.pdf

Comments must refer to the docket number and title:

Docket No. FR–5352–A–01 RIN 2502–A178 Real Estate Settlement Procedures Act (RESPA): Strengthening and Clarifying RESPA’s “Required Use” Prohibition Advance Notice of Proposed Rulemaking.

Comment due date: Sept. 1, 2010.

HUD strongly encourages people to submit comments electronically through the Federal eRulemaking Portal atwww.regulations.gov.

Comments can also be mailed to:

ANPR to the Regulations Division Office of General Counsel Department of Housing and Urban Development

451 7th Street, SW. Room 10276

Washington, DC 20410–0500

No FAX comments are accepted.

© 2010 Florida Realtors®

RELATED STORY:

ARE FORECLOSURE MILLS Coercing Buyers for BANK OWNED homes? ARE ALL THE MILLS?

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MAJOR WIN FOR HOMEOWNERS IN NJ SUPREME COURT; SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-2634-08T2

02-01-10 COPY APPELLET RULING CFA2 022010. We hold that a series of standardized agreements to cure default between a non-debtor mortgagor and the mortgage servicer are covered by the Consumer Fraud Act, even when executed post-foreclosure.

 

 

 

From: nikoalexopoulos

As a lot of you have come to realize LOAN MODIFICATIONS have not solved anyone’s problems but to put more money into the bank’s pockets and have the homeowner eventually wind up back where they were before the loan mod, but this time with the bank arguing that although they tried to help the homeowner the homeowner fell behind again, therefore they need to finish the foreclosure. The bank also argues that if they were any discrepancies or infractions on the original loan, well by the homeowner agreeing to a LOAN MODIFICATION the original loan is null and void and the terms on the loan modifications are in effect. They also argue that the homeowner basically signed away their rights to the original loan and are bound by the loan mod terms. However the bank still maintains theirs and will seek to foreclose on the homeowner. Well, the judges are beginning to see what we have been saying all along. BE AWARE if fraud was committed in the original loan ti does not make it go away because the bank gave the homeowner a loan modification and it puts the homeowner in a position to seek legal and financial compensation from the bank. GOD BLESS
Here is the detail info:
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-2634-08T2

This is why getting a Forensic Loan Audit is much needed. This is not something an amateur should attempt leave this to the professionals who have the keen eye for understanding complexities to address all applicable regulatory compliance requirements as well as any Federal and State violations.