The Mortgage Bankers Association and a coalition of settlement agents have brought separate suits in federal court to overturn regulations that improve the competitive position of real estate brokerage firms that offer several mortgage-related services.

The complaints, filed in the U.S. District Court for the District of Columbia, allege that the regulations violate the spirit of the Real Estate Settlement Procedures Act. The litigation was initiated Dec. 2. the day the regulations issued by the Department of Housing and Urban Development went into effect.

The National Association of Mortgage Brokers is considering filing an amicus brief in support of the lawsuits while the National Association of Realtors, whose members are the big winners under the regulations, is expected to support the regulations formally.

In its court complaint, the Coalition to Retain Independent Services in Settlements (CRISIS), noted that HUD originally had intended to publish final regulations more in conformity with the litigants' positions. But the Vice President's Council on Competitiveness, the Office of Management and Budget, the Justice Department and the White House chief argued that HUD's version was anti-competitive.

"We lost the argument," HUD General Counsel Francis A. Keating told an audience of mortgage brokers Nov.24.

The principal targets of the MBA and CRISIS are provisions in the regulations that permit the use of single-lender computerized loan origination systems and the payment of fees to real estate brokerage employees who direct borrowers to affiliates of the brokerage that provide mortgage-related services.

"By expressly allowing the payment of bonuses in the controlled business setting, the final Respa rule conflicts with and fails to give effect to the plain language of Respa," the MBA charged in its complaint.

MBA said earlier versions of the CLO provision contained a cap of $250 on fees that could be charged a borrower for use of such a system and required CLOs to be open to several lenders.

"As a result of the final Respa rule regarding CLOs, the congressional intent to avoid subjecting home-buyer-borrowers to unnecessarily high costs for mortgage loans will be needlessly and substantially undermined," the MBA said.

MBA said HUD did not provide adequate certification, required under the Regulatory Flexibility Act, that the regulations would "not have a significant impact on a substantial number of small entities."

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.