WASHINGTON -- The Clinton administration made a pitch Thursday for a proposed compromise on rules to combat kickbacks in the mortgage business.

Nick Retsinas, HUD's assistant secretary for housing, told a briefing for industry groups that the latest draft "tries to achieve a balance" between the competing interests of different industry groups and others, such as consumers.

The rule would implement the Real Estate Settlement Practices Act. While the law was enacted more than a decade ago, the rulemaking process has been bogged down by controversy. And Mr. Retsinas conceded that the process could drag on.

Technological development is racing and the marketplace is evolving, and the government believes the rule will have to be "reviewed actively" over time, Mr. Retsinas said.

Overturning Bush Rulings

"No one wishes more than me that this is the last time we will be reviewing this," he joked, adding, "I'm absolutely certain this will have to reviewed periodically."

As previously reported, the proposed rule overturns the Bush administration's decision on two key areas.

First, it prohibits employers from paying referral fees to employees, such as realty agents, who send business to affiliated companies, such as lenders, title companies, and others.

Those employees who do not have routine contact can be compensated through bonuses that are not directly related to the volume of referrals.

Second, it overturns the blanket exemption from RESPA enjoyed by computerized loan origination systems that are financed by borrower fees.

Instead, the proposed rule defines a "qualified" computerized origination system, as one that offers the products of at least 20 lenders, is interactive, and does not favor the products of one lender over another.

Special Cases

Fees paid by borrowers to such systems would not be kickbacks.

A new twist was also introduced. Lenders would be allowed to pay fees to operators of computerized origination systems to set up and maintain the system.

Many worry that this would lead to veiled referral fees, and industry representatives questioned administration officials closely on the subject.

HUD has also asked for comment on whether lender payments to a "qualified" computerized origination systems should also be exempt, on the ground that they represent payment for services provided, rather than fees for steering business.

The final rule will not be released until next year, an agency official said.

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