HUD supercharges RESPA enforcement
March 30, 2005
Department triples enforcement staff, doubles budget
By Janis Mara
The Department of Housing and Urban Development is ramping up enforcement of the Real Estate Settlement Procedures Act, tripling its enforcement staff and doubling its enforcement budget.
HUD is currently pursuing 60 investigations into alleged violations of RESPA's Section 8, the principal anti-kickback section of the act, a HUD spokesman said.
"This department is a whole new department when it comes to enforcing the law," said Brian Sullivan of HUD. The department has tripled its staff and doubled its budget over the last three years, Sullivan said.
In addition, the department is using contract investigators to pursue the investigations, Sullivan said.
Lenders, builders, title companies and other settlement service providers are under investigation for possible violations of Section 8, the principal anti-kickback section of RESPA, Sullivan confirmed.
Additionally, HUD last week announced two related settlements involving allegations that several Tulsa, Okla.-area home builders, real estate companies and title companies were attempting to skirt RESPA's anti-kickback provisions.
Combined, the companies agreed to pay $450,000 and cease their business practices that triggered HUD's investigation, according to a statement from HUD.
HUD claimed that the parties violated Section 8 of RESPA, which prohibits anyone from giving or accepting a kickback in exchange for referrals of settlement service business, by creating middleman companies that distributed a portion of the affiliated title companies' profits to the real estate agents and home builders in exchange for steering customers to the title companies.
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Last week's announcement came on the heels of nationwide investigations of title insurance industry practices in which investigators allege similar kickback schemes exist among title insurers, real estate brokerage companies, banks and home builders.
However, Sullivan said the ramp-up in enforcement is not because of the national attention over alleged title insurance kickbacks.
Sullivan said that HUD has over the past three years significantly ramped up its enforcement activity with regard to RESPA as well as the Interstate Land Sales Full Disclosure Act. The latter act is primarily a disclosure law that requires land developers and sellers of undeveloped land to register with HUD and provide purchasers with property reports.
In 2004, HUD received 1,193 RESPA-related complaints, up from 1,111 in 2003, Sullivan said.
Meanwhile, the department closed almost 1,300 RESPA complaints in fiscal 2004, up from 1,200 in fiscal 2003, which tripled the 400 complaints closed in fiscal 2002. According to Sullivan, closed complaints means anything from investigations that were concluded, settlements reached or prosecutions made. The closed complaints category also covers those which the department determined were baseless.
The increase in the number of complaints might simply be a result of the increased number of real estate transactions, both purchases and refinancing, that year, Sullivan said.
The number of complaints received and complaints closed doesn't include investigations HUD initiates on its own, Sullivan said.
Sullivan couldn't disclose the number of agents working on the complaints, the names of companies under investigation or other details.
HUD isn't the only governmental entity stepping up its scrutiny of alleged kickbacks in the title insurance arena.
The Colorado attorney general's office has begun a formal investigation into possible wrongdoing by companies involved in alleged kickback arrangements between builders and title re-insurance companies, Kristen Hubbell, a spokeswoman, confirmed.
The investigation began earlier this month, according to Hubbell, who could give no further details.
In addition to ramping up its RESPA enforcement initiatives, HUD is also looking to make reforms to the federal act to make the home buying process easier for consumers to understand. HUD Secretary Alphonso Jackson earlier this month said proposals are underway and will be submitted to Congress for input within two months.
HUD's previous attempts to make changes to RESPA to simplify the home buying process for consumers came to a halt in March 2004 when Jackson withdrew the agency's proposal from the White House Office of Management and Budget. At that time, Jackson said HUD would reexamine the rule, revise it if necessary and re-propose it.
This time, HUD will seek input from members of Congress before releasing proposals for public comment.
"Once we get (Congress') input, we will go back to the industry, and let the industry group make their comments…I can assure you that once that is done, we will not hold (the rule) in abatement as we did last time," Jackson told the House Financial Services Committee at a hearing earlier this month.
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