Released: November 18, 2006

‘RESPA police’ help with builder disputes

Source: Kenneth R. Harney, Washington Post (Free Registration)

When home builders behave badly, some of their customers may have an unexpected resource: The federal government’s “RESPA police,” who say they have become increasingly active in resolving consumer complaints through nonpublic interventions with builders.

RESPA stands for the Real Estate Settlement Procedures Act, a consumer protection law that targets kickbacks and other settlement-related abuses. The RESPA police are investigators at the Department of Housing and Urban Development. They are best known for their splashy public settlement agreements with real estate, title insurance and mortgage industry firms, sometimes involving hundreds of thousands of dollars.

But with no public fanfare, the RESPA police have begun intervening in complaints brought by individual consumers who say builders are unfairly forcing them to use their affiliated mortgage companies. The affiliates’ loan deals, the complaints say, typically are more costly than those available from independent mortgage brokers and lenders.

In one case outlined by HUD officials in an interview, a builder canceled a sales contract and seized an $11,845 good-faith deposit when a buyer refused to use the builder’s affiliated mortgage company.

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