RESPA Rewrite Affects Builder Discounts Tied to In-House Mortgage Unit
The Department of Housing and Urban Development, in rewriting the RESPA rules, has clamped down on builder discounts that are tied to use of the homebuilder's mortgage company. Starting Jan. 16, builders won't be able to offer $10,000 discounts on the purchase price if the homebuyer uses their affiliated mortgage or title company. The final Real Estate Settlement Procedures Act rule issued by HUD on Nov. 17 says these referral arrangements are potentially "problematic" under RESPA. "RESPA and this final rule limit tying such a discount to the use of an affiliated settlement provider," HUD says. Homebuilders, Realtors, mortgage bankers and other industry groups opposed this rule change. The National Association of Home Builders contends the change will eliminate significant savings for homebuyers. But a NAHB spokesman said the builders are not ready to comment on HUD's action. RESPA attorney Phillip Schulman said builders will have to change the way they promote their affiliates. "They won't be able to link the incentive to the use of the affiliate," the K&L Gates partner said.
I personally think that this is more fair to everyone involved in the process. My clients should be able who ever they want as a lender and title company and shouldn't be penalized for doing so. The builders are still going to need to offer these incentives in this market to move their inventory so I don't think that it will affect the consumer in a negative manor.
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