Trade groups from the real estate and mortgage lending industries have been preparing opposing arguments to take before the Department of Housing and Urban Development as the Aug. 6 hearing on the Real Estate Settlement Procedures Act nears.
Their differences revolve around four provisions in Respa's Regulation X that control an employer's payment to its own employees for referral fees, payment for computerized loan origination services, state laws or regulations governing controlled business arrangements and written disclosures of those arrangements.
HUD asked for written comments after a July 1 hearing and so far has received more than 50 responses from trade organizations and individuals representing firms in the field.
In written comment to HUD, the National Association of Mortgage Brokers called the regulation's controlled business arrangement provision unfair and urged changes.
"The remuneration to nonemployees of the settlement provider gives an unfair advantage to affiliated companies and limits the choices open to the consumer," the letter said. "Real estate managers are encouraged - often coerced - to direct business to related companies with the expectation of additional compensation on a transaction, not because it is less expensive for the consumer.
"By compensating associates and overtly encouraging the consumer to use only affiliated providers, their control over the buyer is substantial. Even though the original intent of the Respa legislation was to prohibit illegal kickbacks, this provision of the revised regulation allows legal kickbacks to the detriment of the very consumer that it was intended to protect."
In contrast, the National Association of Realtors stressed that the consumer was actuary benefiting from the provisions and that mortgage brokers' dissatisfaction was bent more toward losing business than toward protecting consumers.
"Congress ... did acknowledge the potential consumer benefits to be gained by the economies of scale offered by diversified financial services firms," NAR said.
"There are countless Realtors, mortgage brokers and insurance agents who can join forces and compete with the ~big guys' by delivering personal service at a competitive price," NAR added. "After all, who knows the local customer base best - a real estate firm or mortgage banker who operates as an integral part of the community or a national corporation?"