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On June 25, 2010, we
notified you about the National Association of Realtors asking
the Department of Housing and Urban Development (HUD) for
clarification on an unofficial staff interpretation HUD had issued
on February 21, 2008 regarding Home Warranty
Companies.
In that interpretation, HUD's Office
of General Counsel opined that services performed by real estate
brokers and agents on behalf of a home warranty company (HWC) are
compensable as additional settlement services if the services are
actual, necessary and distinct from the primary services provided
by the real estate broker or agent, and allowed that the real
estate broker or agent may accept a portion of the charge for the
homeowner warranty only if the broker or agent provides services
that are not nominal and for which there is not a duplicative
charge.
HUD's Office of General Counsel
published an Interpretive Rule which interprets Section 8 of the
Real Estate Settlement Procedures Act (RESPA) and HUD's regulations
as they apply to the compensation provided by home warranty
companies to real estate brokers and agents. Generally, an
interpretive rule is exempt from public comment, but HUD offered a
comment period.
After reviewing the comments
received, on November 23, 2010
HUD determined that changes are not needed to the interpretative
rule.
An interpretive rule does not change
existing law. It represents HUD's interpretation of its existing
regulations.
Therefore, this interpretive
rule does not constitute a change in HUD's interpretation of RESPA
or the RESPA regulations, but is an "articulation" of HUD's
interpretation of RESPA and the implementing regulations that
specifically apply to home warranty company payments to real estate
brokers and agents.
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HIGHLIGHTS
Interpretive
Rule
- A payment by an
HWC for marketing services performed by real estate brokers or
agents on behalf of the HWC that are directed to particular
homebuyers or sellers is an
illegal kickback for referral under Section 8 of RESPA.
- Depending upon
the facts of a particular case, an HWC may compensate a real estate
broker or agent for services when those services are actual, necessary and
distinct from the primary services provided by the real
estate broker or agent, and when those additional services are not
nominal and are not services for which there is a duplicative
charge.
- The amount of
compensation from the HWC that is permitted under Section 8 of
RESPA for such additional services must be reasonably related to the value of
those services and not include compensation for referrals of
business.
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Visit
Library for Issuance
HUD: RESPA - Home Warranty Companies' Payments to Real Estate
Brokers and Agents, Interpretive Rule: Response to Public Comments,
Questions and Answers
November 23, 2010
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