HUD TO SEEK COMMENT ON RESPA'S "REQUIRED USE" DEFINITION
All Other RESPA Provisions Remain on Implementation Track

WASHINGTON - The U.S. Department of Housing and Urban Development today announced that it intends to seek further public comment on how it should define the scope of a prohibited practice called "required use" under the Real Estate Settlement Procedures Act (RESPA). HUD will delay the planned implementation of RESPA's required use provision for 90 days, or until July 16th, as it solicits public comment on whether to withdraw its new definition that would have taken effect in January.

HUD's notice will inform consumers and the mortgage industry of its intent to further delay the effective date of the required use definition and seek additional public comment as a result of a legal challenge led by the National Association of Home Builders. New rulemaking would give HUD the opportunity to present for public consideration a new proposal based upon HUD's reevaluation of the provision and desire to provide better consumer protections.

Last year, HUD proposed changing this required use definition to help consumers shop more effectively for homes, mortgages and settlement services that are best for them, free from the influence of disingenuous discounts and incentives that steer consumers to the use of affiliated businesses. HUD's final rule revised the definition of "required use" to enhance consumer protections against certain practices conducted by affiliated business arrangements.

HUD believes that some businesses have used the affiliated business arrangement exception under Section 8 of RESPA to steer consumers to affiliated settlement service providers that may not provide the best mortgage products or settlement services for those consumers. A number of such complaints concern builders, who are in a position to refer settlement service business to their affiliated mortgage and title companies.

To read HUD's rule, visit HUD's website.

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