TopMortgage Compliance Update (1)
  June 3, 2010
                                      RESPA: "Required Use" Rulemaking Proposed  

Follow us on Twitter

Find us on Facebook



Mortgage Compliance

Service Presentations

CORE Compliance

About Us

Our Clientele

News & Views Posts



Contact Us


Mortgage Compliance

Due Diligence

Defaults and Claims

Forensic Mortgage Audit

FHA Examinations

Legal Reviews/Remedies

CORE Compliance Matrix

Loss Mitigation

Mortgage Fraud Audit

Quality Control



Business Development

Policy Guides/QC Plans

IT and IS

Disaster Recovery Plans



Email Us

Mailing List Rainbow

HUD published notification today of an Advance Notice of Proposed Rulemaking (ANPR), which commences the process of initiating rulemaking.

The purpose of the ANPR is to "strengthen and clarify" the prohibition against the ''required use'' of affiliated settlement service providers in residential mortgage transactions under Section 8 of RESPA.

According to HUD, the ANPR is necessary because HUD has received complaints that some home buyers are committing to use a builder's affiliated mortgage lender in exchange for construction discounts or discounted upgrades, without sufficient time to research their contracts or to comparison shop.

Therefore, this ANPR will solicit information that can be used to inform any future revision or clarification of the regulatory definition of the ''required use'' of affiliated settlement service providers in residential mortgage transactions.

By means of issuing the ANPR,  HUD seeks comments from sources that are experienced in affiliated business arrangements in residential mortgage transactions.

Interested persons are invited to submit comments regarding this 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.

Comment Due Date: September 1, 2010

In order to address concerns about the operation and effect of incentivized affiliate referrals, HUD issued a revised definition of ''required use'' in its Final Rule on November 17, 2008, which was to take effect on January 16, 2009. The revised definition of ''required use'' in the November 17, 2008 Final Rule would have provided as follows:

"Required use means a situation in which a person's access to some distinct service, property, discount, rebate, or other economic incentive, or the person's ability to avoid an economic disincentive or penalty, is contingent upon the person using or failing to use a referred provider of settlement services. In order to qualify for the affiliated business exemption under 3500.15, a settlement service provider may offer a combination of bona fide settlement services at a total price (net of the value of the associated discount, rebate, or other economic incentive) lower than the sum of the market prices of the individual settlement services and will not be found to have required the use of the settlement service providers as long as: (1) The use of any such combination is optional to the purchaser; and (2) the lower price for the combination is not made up by higher costs elsewhere in the settlement process." (See 73 FR 68239-68240)

As a result of litigation challenging the revised definition, HUD deferred the effective date for the revised definition, and subsequently withdrew the revision by a Final Rule published on May 15, 2009 (74 FR 22822). When HUD withdrew the revised definition, it left in place the existing definition of ''required use,'' pending new rulemaking on the subject.

HUD's Final Rule withdrawing the revised definition of ''required use'' noted that public comments received in response to the proposed withdrawal had highlighted the potential complexity of existing affiliated business arrangement practices and the need for further clarity on the application of ''required use'' to such practices. The comments also underscored the need for HUD to continue to pursue reform in this area in order to protect consumers from harmful steering and referral practices.

In withdrawing the definition, HUD stated its intention to pursue new rulemaking on the subject of ''required use.'' In the May 15, 2009, Final Rule, HUD also reiterated its commitment to the goals of RESPA reform and to addressing referral practices that result in required use. This ANPR is in furtherance of that goal.

Visit our Library for Issuance
  Law Library Image

''Required Use'' Prohibition: Advance Notice of Proposed Rulemaking

FR: Vol. 75, No. 106, 31334-31338 (06/03/10)


Mortgage Compliance
Compliance Administration
Defaults and Claims Reviews
Forensic Mortgage Audit
Business Development
Mortgage Fraud Audit
Quality Control
FHA Examinations
CORE Compliance Matrix
State and Federal Examinations
Fannie/Freddie/Ginnie Applications
Mortgage Due Diligence
Legal Reviews & Remedies
Loss Mitigation Compliance
HMDA & CRA Reviews
Disaster Recovery Plans
IT & IS Compliance
Statutory Licensing

Lenders Compliance Group is the first full-service, mortgage risk management firm in the country, specializing exclusively in mortgage compliance and offering a full suite of services in mortgage banking. We are your outsourcing compliance solution.

This communication is sent to our valued clients and colleagues, who regularly receive our Advisory Bulletins, Mortgage Compliance Updates,  Compliance Alerts, Licensing Alerts, and News and Views.

These publications are free to subscribers. Information contained herein is not intended to be and is not a source of legal advice.

2010 Lenders Compliance Group, Inc. All Rights Reserved.