Voice for Real Estate 56: Referral-Fee Win, Faster Closings
REALTORS® won big when a federal appeals court slammed the Consumer Financial Protection Bureau for a RESPA referral fine it levied on a mortgage company that was following HUD rules. The Voice for Real Estate video for the week of Oct. 17, 2016, also looks how to use social media the right way to build your business in The Takeaway with Nobu Hata, a new audio podcast series. It also looks at the drop in delays one year after new closing rules took effect. It also looks at why it will take a few years before the Rural Housing Service can use delegated underwriting like FHA. And NAR scores a win when an FHA handbook is changed to remove a provision that would have required appraisers to act more like home inspectors when it comes to appliances.
- RESPA referral-fee win
- Fewer closing delays
- Faster RHS loans?
- FHA appraiser duties
- The Takeaway with Nobu Hata
Real estate wins - and the CFPB loses - in a major federal court ruling
Delays happening less often under the new closing rules
And faster rural loan processing? Hurry up and wait!
These stories and more on The Voice for Real Estate.
Hi, I’m Stephen Gasque with the National Association of Realtors.
In a major win for real estate, a federal appeals court ruled against the Consumer Financial Protection Bureau. The issue? An important aspect of Sec. 8 anti-kickback rules under the Real Estate Settlement Procedures Act, or RESPA.
The court says CFPD was wrong to impose a massive fine—$109 million—against a mortgage company. That company was referring business to mortgage insurers that were also customers - of the company’s affiliated mortgage reinsurance businesses.
The big penalty was wrong, the court said, because the mortgage company had structured its arrangement years ago -legally - and entirely in accordance with the rules as interpreted by the U.S. Department of Housing and Urban Development. At that time RESPA was enforced by HUD. Under HUD’s interpretation, referrals are fine, as long as they're covered under so-called "tying arrangements" in which the companies pay fees at fair market value, for affiliated services.
Today, the CFPD enforces RESPA and it imposed its fine based on its OWN interpretation of the rules. It even imposed its interpretation retroactively, saying the company was acting illegally even when it was following HUD’s rules.
NAR sent a friend-of-the-court brief arguing that CFPD was wrong to penalize the, and the court agreed. But that's not all! The court also said CFPB’s interpretation was wrong and HUD’s was the correct one.
For NAR, the issue is important because many real estate professionals enter into marketing service agreements with lenders and other settlement service providers…agreements that are structured similarly to the one involved in the case.
NAR Associate General Counsel Ralph Holmen has more.
There’s still more to come. The court sent the case back to determine if the fees the lenders were paying were in fact set at fair market value. But that’s a secondary issue from NAR’s perspective. Because what’s important to Realtors is the legality of the arrangements, and that is what the court established. CFPD might appeal. If it does, we’ll keep you updated on that.
In another story involving the Consumer Financial Protection Bureau, it’s been a little more than a year since those new federal closing rules took effect. As you know, under those new rules, the HUD-1 Settlement Form and the Good Faith Estimate were replaced with new a Closing Disclosure and Loan Estimate, and several transaction deadlines were imposed.
Now that we have the first year behind us, NAR has looked at how well things are going, and here’s some good news: transaction delays as a result of the new processes are down, from about 11 percent of all transactions at the end of last year to only about 8 percent now. Another improvement: agents are having a little less difficulty getting a copy of the Closing Disclosure so they can provide advice to their clients. NAR’s Ken Fears has more.
NAR continues to work with both the federal government and other real estate industry groups to keep improving the new process, including making it easier for agents to get the Closing Disclosure.
The Real Estate community cheered when President Obama signed H.R. 3700 into law a few months ago. The Housing Opportunity Through Modernization Act made big improvements to FHA condo financing. But the law also contained a provision --- that would greatly speed up how long it takes to get federally backed rural housing loans approved. That provision lets the Rural Housing Service—which is an agency within the U.S. Department of Agriculture—use a direct endorsement process similar to the one used by FHA… so that approved lenders can originate loans without having to get each and every loan approved in Washington upfront.
That’s a big win but it’s going to be several years before it actually takes effect. That’s because the Rural Housing Service first has to get its plan approved, and then it has to get the funding to make the changes…. right now, it doesn’t have that money. NAR’s Sehar Siddiqi has more.
In another regulatory update, HUD listened to NAR and changed its FHA single-family loan handbook. It clarifies an important point: appraisers are not required to perform functions that are more appropriately done by home inspectors. Things like testing the oven and other appliances. HUD was going to require that very thing, but NAR made its concerns known… and that provision was changed. Now, appraisers only have to make note of all appliances in the home that add to its market value.
Are social media sites like Facebook a big drain on your time? Or a big plus - for your business and other activities? Maura Neill, a top real estate professional in the Atlanta area, has been using social media to ramp up her referrals and build attendance at charitable events she hosts each year. Neill goes into depth on how she succeeds both online and offline in The Takeaway with Nobu Hata, a new podcast series hosted by NAR’s director of member engagement.
You can hear or read the entire conversation and get ideas for you business at The Takeaway with Nobu Hata on nar.realtor.
And that’s our show for the week of October 17. Thank you for joining us, and be sure to join us next time, when we’ll be reporting to you from the 2016 Realtors Conference & Expo in Orlando. There will be hundreds of forums, educational sessions, and committee meetings over the five days of the conference as well as the largest trade expo for real estate professionals. And the NAR Board of Directors will be meeting too. We’ll be updating you on all the decisions it makes that will help you build your business. Watch for that special edition of The Voice for Real Estate.