Comments are being accepted until Sept. 19 on a proposal to ban bonuses for employees who refer real estate clients to affiliated lenders.
This latest change to the rules implementing the Real Estate Settlement Procedures Act was proposed July 21 by the Housing and Urban Development Department.
The rule would affect controlled business arrangements which are networks of related companies that offer services associated with real estate settlements.
Although some customers value this one-stop shopping, there have been complaints that giving employees financial incentives to keep the business in-house is unfair competition.
Currently, independent real estate agents cannot take such fees.
Direct referral fees would be banned under the proposed rule, as would compensation related in any way to referrals for employees whose jobs give them the greatest ability to influence consumers.
"We are hopeful that HUD's proposal will be well received by both consumer and industry groups," said HUD Secretary Henry, Cisneros in announcing the proposal. "While we are committed to the strong consumer protection orientation that is reflected in the proposal, we are actively seeking public input on how to ensure the proposal will
work well in practice."
Respa requires bankers to give home mortgage borrowers an estimate of how much they will owe before the loan closing.