HUD wants to ban referral fees to affiliated real estate agents.

WASHINGTON -- The Department of Housing and Urban Development is proposing to outlaw the payment of referral fees by lenders to real estate agents of affiliated companies.

A Bush administration proposal would have allowed such payments.

The shift is the latest in a series of efforts by regulators to draft rules to implement a law aimed at combatting kickbacks for loan referrals. The proposed regulation will be published in the Federal Register July 15.

The department allows an exception that mortgage bankers believe could be a big loophole. Managerial employees who do not have routine contact with the public may get bonuses that are not directly related to the volumes of referrals made.

Also, the department defines computerized loan origination systems as being interactive and including at least 20 lenders.

Real estate agents must tell customers if they receive a fee for helping them shop for a lender that is part of the computerized network. They also must collect the fee upfront.

The rule could lead to "hidden fees," says MBA staff vice president Brian J. Chappelle. Ultimately the lender would pass the fee on to the consumer.

The rule is "kind of a mixed bag," says Mr. Chapelle. "It's definitely moving in the right direction, but we have a ways to go."

The National Association of Realtors was still studying the rule last Friday, and declined to comment on its provisions.

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