RESPA Doesn’t Seem To Apply To All…
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August 13-14
August 14, 2013
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KB Homes needs this money to pay their lawyers for all of these lawsuits they are subject to…..
Appraisal fraud and shoddy construction are some of the reasons they are getting sued.
Haven’t you guys learned yet that ALL business and industry is rigged against the little guys, and govt. is the top recipient and promoter of this corruption? Keep shouting about how unfair life is; you’re just whistling in the graveyard. Oh, and by the way, you’re not naive enough to also believe that you live in a democracy are you? And, how “free” do you really think your free market economy is? Remember; you’re either on the inside or the outside, and apparently you and your supporters are on the outside.
You heard it here first, the winning bidder will be IMortgage. All the Countrywide builder folk who didn’t go to MetLife went to IMortgage and the
MetLife originators are already being recruited by IMortgage.
I have never understood the RESPA guidelines…this topic is at the forefront for my confusion. I work in AZ where “in house lenders” are pushed on customers and I don’t see how that is fair. I now work for a company that requires it’s borrowers to use THEIR contracted title company. HUH??? Am I missing something? This is totally recking the relationships that we spent years of our careers building and the circles of trust with our partners that refer us business.
Frustrated to say the least…
Brian,
Love the sweater! You’ve dropped some Lbs. What’s next, Jameson lite?
After working for several major lenders for over 15years, these are my findings:
The corruption, steering, and kickbacks with Builders vs non steered Mortgage Broker / Lenders regarding RESPA was and still is 1000% out of control with Builders and has never been addressed by RESPA / HUD completely and fully, stopped, investigated and charges filed etc…. They hit a few but never hit even the tip of the iceberg. If they did a complete investigation they would find the majority of the builders whether they steer to outside or to their own separate owned mortgage company (which is case in most loans) that most all deals were forced on the borrower to use their steered service including their owned title agency (which is an additional issue) or the borrower/ buyer was told they would loose major dollar incentives like $10,000 to $20,000 or more in upgrades to the home they were about to purchase etc… vs going to their own lender who could give them a much better loan program and much less fees.
This should be the 1000% answer that they committed a crime / major violations regarding RESPA. So now what agency is needed to charge all these companies??? Please advise and I would like to see the majority of these offenders get justice immediately as they are still committing the same offenses to date and making thousands to millions, when you are cut out of the picture completely. How does that make you feel???
Hi guys,
I think, and I’m not sure, but because the builder is the seller they can dictate the terms of the sale that includes lender, title, escrow etc as long as its known to the buyer before they are obligated on the transaction. I can see your point if this was a agent saying who the lender has to be for their own gain and in CA there is no secret profit for DRE licensees and of course coming under the RESPA rules as well.
Lets face it on REO deals they do the same thing, so I think the catch is the seller is dictating the terms of the contract and not the agent is the underlying factor here.
My best,
Ed
Ed, it may be legal on the builder side, but it is no way legal from the lender’s side.
Any way you look at it, the lender is paying for the rights to those referrals. The only way they can get away with it(and they do) is with a JV or ABA.
Legal or not, it’s pure crap and we as well as the congessional thieves know it.
Really??? I mean REALLY???? Are you guys for real????? Forwards this to who????
Realtors don’t give a crap who does the mortgage as long as the deal gets done and they get paid.
Appraisers don’t give a crap since they don’t control their own destiny anymore.
The consumer doesn’t care who does the mortgage as long as they get the “best rate” and are generally apatheteic about most issues unless it relates to losing cell service.
Mortgage brokers are a disjointed bunch of mice running around looking for that next piece of cheese and have no collective voice.
Banks love this since they get an opportunity to buy low hanging fruit……..So who are we supposed to send this to??????
Oh, I forgot, the CFPB and our congessional thiefs (sorry, did I say that out loud?) I meant congressional representatives.
Here’s a little dose of reality boys….the rules do not, nor have they ever applied to the big boys. They only apply to us poor schmucks who don’t have a mutimillion dollar lobby budget.
Scream from the highest rooftops to get the message out and you’ll get is arrested for disturbing the peace. This whole industry has turned into a giant joke and we are the court jesters.
First sensible comment all day.
I sent the link to the RESPA divison of the CFPB. Will share what I get back from them since they are now enforcing RESPA.
awesome!!
Some of your videos are GREAT, and need to be forwarded on…. BUT…. you need to provide a method where we can forward JUST & ONLY the video without allt he advertising. Some of these videos should be forwarded to the general public so that they can see the TRUTH about what is going on, but this needs to be done sans everything else but the video.
we’re working on a solution for those that feel they cannot forward our vids.
This has been talked about for years. I actually got a hold of someone. They said it is the builder’s home to sell and that they could make almost any restriction on the buyer they wanted to. It is the buyers choice to either except it or not. There for it is not a violation. Sellers can do the same. If you have a seller that will only sale if the buyer uses you then that is OK. Again, it is the buyers choice. One question I have is. Now with HVCC, do the new homes get to use dollar for dollar upgrades in the value?
As for the bidding, it is generally called a “Marketing Agreement”. This is how most of the in house lenders handle it. The make a deal with the Builder/RE office to pay them X dollars and in exchange they are the exclusive lender and get in to all the meetings and are promoted heavily. Because the do only get a percentage it is consider marketing and not steering. GO figure.
Regardless of what the buyer chooses to do, the violation occurs when the builder accepts payment from a lender, and then refers business to that lender as a result of this payment.
You could make that argument for just about every marketing relationship under the sun. The practice did garner some “discussion” when Dodd-Frank was being drafted, but it’s funny how nothing actually ended up in the bill. Crap is crap.
Your a Hypocrite. TBWS got in bed with NAMB and yet NAMB backed RESPRO last January to have this EXACT feature REMOVED from the Fed Rule on the MLO Comp last year.
If you want to bash someone then step out call NAMB as dirty on this issue as all the Affiliated Builders.
What if KB held an auction and nobody came? The whores here are the bankers. As a mortgage banker I choose to run an ethical and legal shop. I try to lead by example. I do not bid on any kind of referral business. In seminars, in forums, in community and association meetings, I urge all industry members to refer business to those that deserve it. Those that have earned it, the old fashion way, they worked for it.
When laws are ignored, it breeds contempt. Contempt for the law, and contempt for those that abuse it. Just like the members of Congress and State Legislatures, these builders and bankers lack “Dignity, Integrity, Honesty and Self Respect.” Shame on them and Shame on us for doing business with them and re-electing them.
RESPA is far too busy enforcing rules like — title company can’t pick up contracts from real estate agents for free or making flyers for us — to take care of the big guys and the big stuff.
I have been in the business for 30+ years and to be frank, RESPA IS A JOKE! It has always been a joke with builders preferred lenders and real estate firms getting as much as $5000 a month for allowing a lender to “rent space” in their office. Man wouldn’t it have been neat to have Barney Frank jump on this band wagon! Although I am not at all sure that he would have made millions just to be quite. This problem is so big that I don’t think that it will ever be solved within my career. Too bad for the consumer.
i agree, forward this video along and lets get the word out!! ~ Brian
Brian, we need to get a Petition to HUD going viral that we can then get to our representatives. Resharing on FB will not be enough without collecting some documentation to petition our beloved government reps.
A few years ago we did builder lender turndowns at the broker/banker where I worked; ie: subprime and alt A. The builder was Pulte Homes. We were allowed to add 1% to each HUD and they received the 1% at closing directly from the title company. I guess someone got in trouble for that, and we then sent them a monthly check after closing from our office and it appeared on the HUD as a discount point. After a couple of years, we were told we could no longer do that, so they ceased giving us loans. I was told at the time that RESPA does not apply to builders. Just as it does not apply to realtor/title company relationships!
Great Vid guys …
Let’s also take a real hard look at how several of the biggest funding lenders are doling out their REO listings! As in … in return for REO listings – real estate agents give a quiet (“let’s just keep this between us kids”) commitment to refer a percentage of their buyers to the lender’s originators.
It’s happening BIG TIME!
Please! You’re making a statement you know nothing about. REO Realtors are not co-erced to give the banks referrals. They are the Seller, just as any seller they have the right to request a pre-qual through them, just as a cash buyer must present proof of funds to me before I submit their offer. This assures the bank that the buyer has been properly pre-qualed, income, credit checked etc. vs. getting a pre-qual that has been sloppily done and we all know it happens. A buyer can refuse to do so, but, the Seller will take the option of treating them then as a cash buyer with no recourse should they not get the loan closed. This does feed business their way but nine times out of ten the buyers use their own broker/banker.
The first and last home I bought from a builder involved these shakedown tactics under the guise of extra closing cost help. I was young and not in the business at the time, but tt smelled them and it smells worse now… thirty years later. It is now so endemic to the culture that even the Franks and Dodds ignore it. Realtors don’t care, only lenders who missed out on the bidding are unhappy, consumers still don’t know better.
The solution will not come from the industry. It will only come when the marketplace is educated and tells builders to engage their private parts in an oral fashion.
But what will we do as stupid consumers who got to have the newest and bestest? Buy from a small builder who just wants to sell you a spec home or buy a foreclo or any one of numerous excess housing available in this climate. You don’t have to be an activist to know that an organized boycott against the big boy builders works wonders.
If a builder wants to keep building homes in an already overdeveloped market and still wants to tell buyers who to use for their lending, enough refusals will end that “preferred lender” relationship faster than any lobbying effort by any trade association. If consumers won’t complain, then that is their problem.
Don’t curse the darkness, light a bonfire under the bad guys.
This is a great issue for the new Consumer Finance Protection Bureau to investigate, clearly their responsibility. An investigation may be a better use of my money than re-designing forms.
How many things in this industry have changed since RESPA passed in 1974? There are original RESPA rules that are obsolete today.
Thanks for pointing out the ironies with today’s selective enforcement of RESPA and other lending violations,i.e., “loan steering”. I think the regulators are much too busy drawing up new regulations to enforce the ones they have already written. It’s too much of a bother. It’s publish or perish for the govt, ya know?
You can light up the sky with Roman Candles and they will not do anything.
I had written HUD twice on the same issue regards to this. I even wrote in my 2nd letter I had absolute proof of RESPA violations to get a response. I told them if they do not reply, that I too will take that as “it is OK” to practive Kickbacks. I got no response. NONE!
Haven’t we been down this road before…a few times if I recall…
On November 17, 2008 HUD adopted a rule amending RESPA and it’s term of ‘required use’ to take effect Jan 16, 2009. (ie preventing the kick backs). NAHB (National Association of Home Builders) among others I assume stepped in and got it delayed. During the delay they were able to make it just go away and never be implemented. Another victory for the little guy.
Competing with this arrangement over the years has always been fun. Many smaller (non-national) builders in my area employ the same technique. I mean it’s one thing if another lender will give a ‘free’ appraisal…quite another if they give $15,000 closing costs and an finished basement. At that point you can be the smartest lender on the block, structure the loan that is best suited for borrower and have the buyers over for Thanksgiving dinner…they’re taking the basement.
The only comfort that I have seen from this is that the Realtors at large in my area tend to regard the LO’s in these arrangements as hacks. More often than not they aren’t able to educate their buyers and there is a higher percentage of blowups at the end. They see the scam for what it is so there is no fear on my end that they will be getting any other non-builder driven business.
Doesn’t anyone know a hungry investigative reporter, looking to make a name for him/herself? These are stories that beg for the light of day (and honesty and disclosure and fairness) to be shined upon them! (But please, if you involve the media do make sure that you are talking with someone who a) has a brain and b) understands what you are saying. Doesn’t it gall you to read some national ‘expert’ spouting off about the industry without having a grasp on the situation, giving rules for how to proceed in a situation, a la HARP II, but not giving ALL the information that is needed or available. It surely irritates me!)
Good job on the weight loss! I hope that you are staying healthy, not over-doing it.
It’s always depressing to get that phone call from buyers that you have pre-qualified telling you that they just signed a contract to buy a new home, and that they are going with the builder’s preferred lender because of some ridiculous builder incentive, such as $15K in upgrades or a finished basement. It really is time for this blatant violation of RESPA to stop. Frank and Brian, I hope that you stay on this issue and follow it through until we get some kind of acceptable answer on this from the “powers that be”, much like your pusuit of HVCC.
In a follow-up to this story, we have some “Realtors®” in our area with foreclosed listings, that are requiring the buyer to be prequalified by their lender (who usually is BOA). As a buyers agent, I already have them prequalified, and they are requiring that their credit get pulled again. I have had some buyers that would then, not be qualified to buy due to a reduction in score!
Would that be considered steering as well?
Yes, that is also considered steering. I have been fighting this for years. Lost many deals because of builder incentives and won a few because clients knew I cared about them. I would be happy to see this stopped.
Bank of America requires that any offers be accompanied by a BofA prequalification. It is not the Realtor who is at fault here.
We run into this a lot. We call the bank’s loan officer, tell him or her that we have already preapproved the borrower, who does not want to have his credit re-run, nor does he want to reapply for a loan with some other lender. We offer to send over the 1003, credit and DU findings instead. We have never gotten any serious objections to this approach. Bank LOs don’t make all that much per loan, and I think they are quite happy not to have to do the additional work.
They are the Seller, just as any seller they have the right to request a pre-qual through them, just as a cash buyer must present proof of funds to me before I submit their offer. This assures the bank that the buyer has been properly pre-qualed, income, credit checked etc. vs. getting a pre-qual that has been sloppily done and we all know it happens. A buyer can refuse to do so, but, the Seller will take the option of treating them then as a cash buyer with no recourse should they not get the loan closed. This does feed business their way but nine times out of ten the buyers use their own broker/banker. Joe Parson below has a great handle on what to do in these situations. You don’t have to be too on top to keep your business away from the big banks.
Get down to nuts and bolts when it comes to a BOA PQ and you’ll see that you’re just dealing with a $12/hr data entry clerk who can partially read a credit report. You have to dig to the bottom of things and ask the same questions that the UW will ask to make sure deals don’t blow to pieces. If you work with an LO who cares that they have a reputation to lose if they’re not this thorough and diligent, you’ll usually see all or most of the deals close. Same goes for working with a title company who really cares about conveying clear title. Insurable and clear title are two completely different things. The buyer will want clear title when they go to sell or refinance, so be sure not to use the REO title company who’s just churning a bad title search.
What else is new ? These RESPA violations have been going on forever with builders with “Preferred ” lender stipulations etc….. This also goes on with major real estate companies in this area with their ” in -house ” lenders. ? Is this not steering borrower’s and receiving some sort of kickback ? Current laws are not enforced and the builders, real estate companies and the lenders they are associated with are the biggest violators of RESPA.
If the government let all the financial gurus on Wall street and the Banking community off the hook with no jail time for the economic mess they created, do you really think they are going to police something like RESPA violations ? Give me a break! Again, the average “Joe” LO is screwed again !
Does any one deal with the programs lenders like USAA and Navy Fed promote where they provide a rebate to the buyer post-closing? The rebate comes from the realtor’s commission after being filtered through a relocation company. The agent is not allowed to discuss this fee with the buyer and is required to steer the buyer to the company’s mortgage division. How does this rebate and program more generally not violate RESPA? Agents can’t write a check to buyers post closing – are these programs any less of an inducement to purchase?
The sad part about USAA’s rebate after closing is that the consumer pays for that rebate in their astronomical closing fees.
Shocking breaking news “the government is in effective at enforcing its own rules” I wish it was shocking…. Sadly to say, I have been in the credit business for twenty years and I have lost a lot of business to other credit bureaus that paid a barefaced kick back to the “client”. No one ever got busted for it and I have tried to point it out for years…….. Kick them all out!!!
I noticed the hand shake 2:34 into you video with the 2 suites were left handed hand shakes. Was their a double meaning on agreement?
Also Realtors and Loan Officers please make sure you are paying All you dues and membership fees to NAR and MBA. It seems they are really covering your backs on the RESPA and other problems you are facing.(NOT)
Several years ago there was a lawsuit regarding this very issue in TX. Who won? Industry lost and builders won…most surprisingly given the discovery and the allowed evidence. Welcome to greasing the wheels including the judge (this was later proven fact) as well as government. And thus most grandly illustrates Governments hand in business and how it unfairly tips business as well as controls, and causes harm. Any business government places its hand there is harm to “we the people.” Until Government starts truly representing “we the people” as the Constiution demands and not “business” this will unfortunately continue.
This type of action is not lone to Mortages. This type of action takes place in many other industries: Think GAO foods (Monsanto), Tobacco and the like. What is needed is an “offensive” tactical lawsuit, most likely class action, rather than “defensive” lawsuits. Also exposing our DC representatives as well as state level representatives. And when the lawsuits get going and enough media catches on to the illegal activity you will also find the DC folks running the other way as they did to the Tobacco industry, completely ignoring (for the 1 time in their life) the wheel greasing hefty donations.
And don’t even get me started on the “incentives” that KB and other builders offer ONLY if you use their lender. Closing costs, upgrades, price reductions……criminals the lot of the them.
BINGO!!
I hate to say it, but when has RESPA ever applied to the builder/preferred lender relationship. I remember the first time I saw one of these deals when I was a rookie LO and was shocked to see that the lender was required to pay for the owner’s title policy. In addition, the builder’s use their own contracts that reek of “required use.” Sure, you can use your own lender if you want, but the terms of their standard contract penalize the buyer for doing so, such as reduced seller compensation or a loss of upgrade credits. How do they get away with it? It’s easy, every couple of years, HUD announces an investigation of the preferred lender arrangement and then the NAHB lobbyists get to work and the “investigation” suddenly goes away. It’s as easy as that. I’m sure there are the usual arguments about how preferred lender helps the buyer through increased closing efficiency, yada, yada, yada, like any good LO doesn’t know how to close a new construction deal?
So much is hurting the real estate industry…all perpetrated by the Federal Government. Yet, in Seattle…the investors have arrived from China…yes, they’re heeeeerrrrrrrrrre! Brian, where do you shop? :}