WASHINGTON -- HUD rules due out next month implementing provisions of the Real Estate Settlement Procedures Act will leave many issues unresolved, experts said at a conference last week.
The Department of Housing and Urban Development is expected to spell out how junior loans are covered by the law and to grant exemptions under Respa for business and agriculture loans.
Persistent Confusion
But though some questions will be answered, major confusion will remain -- largely because of how the law was written -- said Daniel W. Morton, vice president and counsel of Huntington National Bank in Columbus, Ohio.
The law was enacted in 1974 but has been amended several times.
The HUD rules are so complex that no one completely understands them, the experts said.
"Lenders want to comply, but they don't know how," Mr. Morton added in an interview.
In addition, he said, "the HUD regulations are intentionally vague" to give the agency more leeway.
He and other experts spoke about the upcoming rules this month at the home equity lending conference of the Community Bankers Association.
One of the most confusing issues, Mr. Morton said, is whether it is legal to pay employees of banks and bank affiliates, such as mortgage companies, for referring customers.
On this question, Mr. Morton said, "the regulation is in no way clear" as to where lines should be drawn." It is unclear, for example, whether a bank teller who tells a neighbor at a party to go to a certain mortgage company affiliated with the teller's bank can properly be given an referral fee.
Aggressive Enforcement
One clear thing, said Paul Schieber, an attorney at the law firm of Blank, Rome, Comisky & McCauley in Philadelphia is that "the world of Respa enforcement is becoming very aggressive."
Mr. Schieber, who has written extensively on the law, said that not only is HUD going after offenders, but so is the U.S. Attorney's Office.
"The dragnet is fairly wide," he said.
A great deal of fear stems from the fact that Respa is a criminal statute, providing for fines of up to $ 1 0,000 and imprisonment for as long as a year.
"Class-action lawyers are going to discover a gold mine in Respa," Mr. Morton said.
