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The Real Estate Settlement Procedures Act (RESPA) under the United States Department of Housing and Urban Development (HUD) has a mechanism for consumers and others to file a complaint with RESPA if RESPA violations are being committed or you believe that RESPA violation is being committed. If a complaint is going to be filed with the RESPA division please make sure you follow the following steps so your complaint gets the most attention from the investigators:

1. List the names,addresses, and phone numbers of the alleged violators of RESPA;
2. Write a detailed summary of what happened or what’s happening that leads you to believe that a violation is taking or has taken place;
3. Make sure you list the specific section of the RESPA statute that was violated. Often times regulators or investigators will miss even the most generic of violations so listing the appropriate violations will help them do their job better;
4. Check your spelling and make sure the complaint is coherent and easily understood to the reader; and 5. Include your name, phone number, and address in the complaint so that an investigator can contact you for more information, if they need to contact you. RESPA Complaints can be submitted confidentially to HUD as well. If you believe you have a potential litigation matter with RESPA to HUD, I would recommend that you submit your complaint to your attorneys prior to submission to the HUD office or let your attorneys file the complaint for you.
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The American Land Title Association (ALTA) sent a letter to the Federal Housing Administration asserting that Department of Housing and Urban Development is violating Section 9 of the Real Estate Settlement Procedures Act (RESPA) with regards to the HUD-designated closing agent stipulation on all HUD properties for sale.

Section 9 of RESPA prohibits the seller of property from requiring the use of a particular title company unless the seller pays for all the borrowers title closing costs. Housingwire.com has more information on the letter sent to HUD by ALTA.

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October Research has selected Charles C. Cain to be a speaker at the 2009 National Compliance Summit on February 19-20, 2009 at The Westin Casuarina Las Vegas Hotel, Casino & Spa. Charles Cain is Of Counsel to the Sterbcow Law Group LLC in New Orleans, Louisiana and is President of Alliance Solutions LLC based in Cincinnati, Ohio.

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A recent RESPA litigation ruling by the United States Sixth Circuit Court of Appeals in Cincinnati, Ohio sparked headlines this week when they overturned a district court ruling denying class certification in the Erik C. Carter, et. al., United States of America v. Welles Bowen Realty, Inc. et al lawsuit. No. 07-3965.

The issue at dispute is whether a Section 8 claim of the Real Estate Settlement Procedures Act violation gives consumers “standing even if the consumer does not allege an above-market race charge for services, i.e. an ‘overcharge.'” The district court previously held that because the defendants did not over charge the consumers they didn’t suffer an injury but the appellate court has overturned the district courts decision.

Welles-Bowen Title Agency is a joint venture affiliated business arrangement, owned by Welles-Bowen Realty, Inc. and Chicago Title Insurance Company–a Fidelity subsidiary. The alleged problem with the relationship however appears to be that Welles-Bowen Title Agency did not really perform any settlement work, review title, or even conduct the closings. However, Chicago Title gave Welles-Bowen Realty, Inc. seventy percent (70%) of the fees and title policy money generated. If the allegations are true then this relationship would appear to be an illegal sham affiliated business arrangement under federal RESPA guidelines. There are other issues at play as well, such as the State of Ohio’s affiliated business arrangement ownership and profit requirements but those were not addressed in this appellate decision.
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The new Real Estate Settlement Procedures Act (RESPA) guidelines are now officially enacted as of Friday, Jan. 16, 2009. However the Required Use Section 9 changes have been put on hold for 90 days pending a review by HUD which was prompted by the National Association of Homebuilders lawsuit.

The new Good Faith Estimate (GFE) and Housing & Urban Development Settlement Statement (HUD-1) can now be used but won’t be required until next year. However if a lending institution does use the new Good Faith Estimate form then the new HUD-1 and HUD-1A must be used as well in order to be compliant with the new rules.

If you are a lender or title agent please make sure you and your staff are educated on these changes because the new rules will create a substantial risk for litigation for companies who are unaware of the new rules.

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We are hearing from multiple sources that the United States Department of Housing and Urban Development (HUD) will be formally announcing delaying the implementation of the new RESPA Reform rule which is scheduled to go into effect on January 16, 2009, The delay is in response to the National Association of Home Builder’s (NAHB) lawsuit against HUD that was filed on December 23, 2008. We will provide an update on NAHB lawsuit later.

The RESPA implementation delay is rumored to be 90 days from Jan. 16, 2009, meaning the new RESPA guidelines rule regarding Required Use and Section 9 of RESPA at this point will go info effect on April 16, 2009. The 90 days will give HUD 90 days to study the NAHB lawsuit.

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The Sterbcow Law Group is pleased to announce that Charles C. Cain will join the law firm effective January 1, 2009. Charles will be “Of Counsel” and will work out of his Cincinnati, Ohio office. Charles is highly regarded as one of the country’s top RESPA compliance and regulatory attorneys by many in the legal and real estate industry. He will add tremendous depth to the firm in our rapidly expanding RESPA litigation and compliance practice.

Charles joins The Sterbcow Law Group from LandAmerica Financial Group, Inc. where he was the Vice President of LandAmerica’s Senior Alliance Business Partner division where he focused on management and creation of over 400 RESPA compliant affiliated business relationships in over 28 states. He also provided employee and independent agent RESPA training. Charles is also President of Alliance Solutions LLC in Cincinnati, Oho.

Charles has been a featured speaker at various events such as The Real Estate Settlement Providers Organization, October Research’s programs such as Title Radio and the National Settlement Services Summit, Ohio Bar Association, Kentucky Bar Association, Ohio Land Title Association, Indiana Land Title Association, Missouri Land Title Association, and Michigan Land Title Association. His reputation and knowledge are one of the many reasons that numerous state regulators throughout the United States consult with him for RESPA guidance.

The United States Department of Housing and Urban Development awarded him the “Special Citation” for Fair Housing Best Practices. He is the Past Chairman of the Real Property Section of the Cincinnati Bar Association, former Trustee of the Cincinnati Mortgage Bankers Association, Member of the Mayor of Cincinnati’s Blue Ribbon Committee of the Cincinnati Housing Partnership, and a Member of the Cincinnati Area Fair Mortgage Credit Project through the Federal Reserve Bank of Cleveland.

Charles is admitted to practice law in Ohio, Kentucky, various Federal Courts, and the U.S. 6th Circuit Court of Appeal.
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Section 6 of the Real Estate Settlement Procedures Act (12 U.S.C. 2605) gives certain classes of borrowers rights, regardless of whether the borrowers loan was held by the lender or the loan service was transferred to one or more loan servicing companies. If a borrower believes there is an issue with the loan servicing (including escrow account questions) on their loan the following steps must be carefully followed:

1. The borrower or the borrower’s attorney must send a “Qualified Written Request” to the loan servicer. *See below as to what is required on a Qualified Written Request Letter.

2. The loan servicer must provide the borrower or borrower’s attorney with a written acknowledgment within twenty (20) Business Days of receipt of the borrower’s request.

3. The loan servicer has no more than 60 days Business Days after receiving the borrower’s request to correct the errors on the borrower’s loan account or the loan servicing company must provide the borrower with a written clarification disputing any such error.

4. Its extremely important to note that during this sixty (60) Business Day period that the borrower’s servicer is forbidden to provide a credit reporting agency any information concerning any overdue payment related to such period or qualified written request.

What kind of damages would a borrower or a loan servicing company potentially be entitled/subjected to? Well Section 6 of RESPA provides for actual damages, additional damages, and costs for individuals or classes of individuals in circumstances where the services are shown to have violated the requirements of Section 6.

Section 6 of RESPA has a 3 year statute of limitations.

It is important to note that borrowers who are experiencing loan servicing irregularities continue to make their monthly mortgage payments.
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The National Association of Mortgage Brokers (NAMB) filed a lawsuit against the United States Department of Housing and Urban Development (HUD) last week. The lawsuit seeks to prevent to HUD from implementing the the new RESPA rule. While NAMB is the first trade association sue HUD, most real estate industry observers expect that dozens of other various local and national trade associations will file suit as well to stop this rule from going into effect.

NAMB believes that the new RESPA rule violates the Administrative Procedure Act (APA) and the Regulatory Flexibility Act (RFA). The lawsuit also alleges that HUD failed to examine the new rules impact on small businesses arguing that the implementation of this rule will significantly hurt consumers and cause unfair imbalances in the mortgage lending marketplace.

If the Obama Administration doesn’t kill the new RESPA rule in its entirety next month when they take office then the odds are this will hot button rule will be mired in litigation and cost millions of dollars in legal fees on both sides.

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HUD new RESPA rule changes the definition of “Required Use” to read as follows:

“Required use means a situation in which a borrower’s access to some distinct service, property, discount, rebate or other economic incentive, or the borrower’s ability to avoid an economic disincentive or penalty, is contingent upon the borrower using or failing to use a referred provider of settlement services. However, the offering by a settlement service provider of an optional combination of a bona fide settlement services to a borrower at a total price lower than the sum of the prices of the individual settlement services does not constitute a required use.”

The new RESPA rule as defined would apply to the condition of the affiliated business arrangement exception to Section 8 that a consumer may not be required to use an affiliated business arrangement (AfBA) settlement service provider and the prohibition under Section 9 that a seller of the property may not require that title insurance be purchased by the buyer from any particular title company (whether affiliated or unaffiliated).

The proposed RESPA rule definition also places limits on incentives based on the use of one or more affiliated settlement services providers. The definition says that incentives can only be offered by settlement service providers, however the rule says that developers and/or homebuilders are not considered settlement service providers. Homebuilders and/or developers under this new rule are prohibited from offering incentives to borrowers to use their affiliated business arrangement companies.

The new RESPA rule says that any incentive must be limited to a reduction in the price for the settlement services. The rule also states that incentives can only be offered to borrowers which means that sellers or other third parties would be forbidden from receiving any sort of incentive.
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