HUD Clarifies Purpose of RESPA Statement of Policy on Unearned Fees

July 23, 2002

WASHINGTON ? HUD Secretary Mel Martinez clarified the Department's purpose in issuing the Oct 18, 2001, RESPA Policy Statement on Unearned Fees in a letter received today by NAR President Martin Edwards Jr.

Martinez states that HUD's October 2001 Policy Statement was drafted primarily to respond to a court ruling regarding the mark-up of a third party charge by a loan originator and that HUD's concern was directed at payments made by consumers for services in connection with a mortgage loan, not "payments by the sellers or purchasers of property for residential real estate under a contract with a real estate agent or broker?."

"This is good news for real estate brokers whose pricing structures include administrative or transaction fees. The secretary's letter suggests that real estate brokers and agents should feel confident that the vast majority of disclosed transaction fees are legal under the Real Estate Settlement Procedures Act (RESPA)," said Edwards. "It's clear that the Department's focus is on fees charged for third party services that are incurred as part of the mortgage loan process such as recording fees and fees for credit reports."

Edwards met with Martinez in April to discuss the issue and wrote him to request a clarification of the Department's policy.

"The October policy statement has created widespread confusion and concern throughout the brokerage industry. While the secretary's letter does not fully answer all my concerns, it goes a long way to put to rest the misinformation caused by the October policy statement," Edwards said.

Source: National Association of Realtors

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