At the request of both the Small Business Administration (SBA) and the Department of Housing and Urban Development (HUD), ASHI participated in three separate roundtable discussions on possible changes to HUD’s regulations under the Real Estate Settlement Procedures Act (RESPA). The sessions were conducted in Los Angeles, Chicago and Ft. Worth in early August, with mortgage brokers and bankers, real estate brokers and agents, appraisers, title companies and other settlement service providers participating. The roundtable in Los Angeles was attended by ASHI Member George Harper. Frank Lesh, ASHI vice president, and I attended the Chicago session; ASHI Member Jim Hemsell attended in Ft. Worth. ASHI was the only home inspector organization invited to attend.
HUD considers updating RESPA
HUD has announced its plan to consider updating its RESPA regulations and developing modern mortgage rules that will regulate how American consumers buy and refinance homes. The SBA/HUD-sponsored roundtables were conducted in an effort to hear from the small business community about possible RESPA changes and their probable impact. Discussions focused on mortgage broker disclosure, good faith estimates, and mortgage and settlement services packaging.
Home inspection fees must remain independent
Through its Member participants at the sessions, ASHI delivered a strong message to HUD that home inspection fees must remain completely independent of all other fees and should not be considered a settlement service to be bundled into the closing costs. This is the very same message we have delivered to HUD over the years whenever the issue of allowing bundling of services and fees is discussed.
ASHI’s Code forbids “pay-for-play” schemes
We were able to deliver another important message for HUD’s consideration in possible revisions to RESPA, that home inspectors should not be included as participants in preferred provider programs or “pay-for-play” schemes. These are the programs offered by various companies that require a fee to be paid by the inspector in order to be added to a list and referenced as a preferred or endorsed provider. Partici-pation in these types of programs is strictly forbidden by ASHI’s Code of Ethics, and it is our intention to continue working until all home inspectors are free from having to participate in order to secure referrals.
In a follow-up letter to the HUD director who facilitated the roundtable sessions, we expressed our strong belief that the independence of small business home inspectors is placed in jeopardy by these programs. Homebuyers and sellers often interpret these preferred provider lists as a tacit endorsement of the professionalism and quality of the home inspector, whereas the only true qualification is for a home inspector to be willing to pay the fee.
We shared with the director that ASHI is not alone in viewing participation as unethical and creating obvious conflicts of interests. Other home inspector organizations, as well as several states including Wisconsin and Arizona, also forbid inspector participation in these programs. Unfortunately, these programs are prevalent around the country and many of our own members have indicated that unless they participate, they will be forced out of business due to lack of referrals.
And, we described home inspectors’ role as the only independent participants in the sale and purchase of a property. They work solely for their customers—the prospective buyer or seller—and have no interest in the sale of the property. While ASHI recognizes that many home inspectors receive referrals from real estate professionals, they are not paid for, they are earned.
Through letters and any other means available, ASHI will continue to work on behalf of home inspectors who earn, rather than pay for, their referrals.
ASHI proud to be asked
There are countless players who have much to say about possible changes to RESPA. ASHI is proud to have been asked to speak for the home inspection profession. For additional information on RESPA reform, visit www.hud.gov/respareform.
More on RESPA
Enacted in 1974, RESPA (Real Estate Settlement Procedures Act) is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.
What kinds of transactions are covered under RESPA?
Transactions involving a federally related mortgage loan, which includes most loans secured by a lien (first or subordinate position) on residential property. This includes home purchase loans, refinances, lender-approved assumptions, property improvement loans, equity lines of credit and reverse mortgages.
What types of transactions are generally not covered?
The following are kinds of transactions that are not covered: an all-cash sale, a sale where the individual home seller takes back the mortgage, a rental property transaction or other business purpose transaction.
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