Early Warning on HUD's New Rule on One-Stop Shopping in Homebuying

NAR is reviewing for potential negative impact on REALTORS® an advance copy of new regulations on one-stop shopping in homebuying proposed by the U.S. Department of Housing and Urban Development. HUD was expected to issue the regulations by the end of April.

NAR analysts say the regulations, which stem from the federal Real Estate Settlement Procedures Act, would affect real estate companies affiliated with other settlement services, such as mortgage lending and title insurance, and those that use computerized loan origination systems (CLOs). The regulations would permit incentive payments to employees for marketing affiliated companies' services, provided the employees don't provide any settlement service to consumers, NAR analysts say. In addition, the regulations permit real estate companies to rent space to lenders, provided the price for the rental is based on market value and not on what lenders are willing to pay, according to the analysts.

NAR fears the new RESPA regulations could reduce real estate practitioners' ability to develop ancillary businesses. In mid-March, the national association flew in nearly a dozen REALTORS® to talk one-on-one with members of the congressional banking committees about the need to maintain a 1992 RESPA rule that allows business diversification.

Under the 1992 rule, realty companies can affiliate with allied services, such as a mortgage lender and a title insurance company, and give discounts to consumers who use the package of services. Such business affiliations must be fully disclosed in writing to buyers before they're referred from one company to another affiliated company. The 1992 RESPA rule also sanctions the use of CLOs by real estate brokers to help buyers select and apply for a mortgage.

The rule permits a real estate broker to charge buyers a fee for this service, provided the fee is disclosed and agreed to in writing by the buyers.

In their meetings with key members of Congress, REALTORS® urged congressional support for legislation in the U.S. House of Representatives, H.R. 2025, that would maintain the provisions of the 1992 RESPA rule. In legislation passed last year, Congress strongly urged HUD to consult with federal lawmakers before issuing any additional new rules implementing RESPA.NAR analysts say it's uncertain when Congress may act.