Real Estate Settlement Procedures Act (RESPA): Home Warranty Companies' Payments to Real Estate Brokers and Agents Interpretive Rule: Response to Public Comments, 74620-74622 [2010-30243]
Download as PDF
<![CDATA[
74620
Federal Register / Vol. 75, No. 230 / Wednesday, December 1, 2010 / Rules and Regulations
Renton, Washington 98057–3356; telephone
(425) 917–6510; fax (425) 917–6508. Or,
e-mail information to 9-ANM-Seattle-ACOAMOC-Requests@faa.gov.
(2) To request a different method of
compliance or a different compliance time
for this AD, follow the procedures in 14 CFR
39.19. Before using any approved AMOC on
any airplane to which the AMOC applies,
notify your principal maintenance inspector
(PMI) or principal avionics inspector (PAI),
as appropriate, or lacking a principal
inspector, your local Flight Standards District
Office. The AMOC approval letter must
specifically reference this AD.
Material Incorporated by Reference
(k) You must use Boeing Service Bulletin
737–57A1279, Revision 2, dated February 2,
2010, to do the actions required by this AD,
unless the AD specifies otherwise.
(1) The Director of the Federal Register
approved the incorporation by reference of
this service information under 5 U.S.C.
552(a) and 1 CFR part 51.
(2) For service information identified in
this AD, contact Boeing Commercial
Airplanes, Attention: Data & Services
Management, P.O. Box 3707, MC 2H–65,
Seattle, Washington 98124–2207; telephone
206–544–5000, extension 1; fax 206–766–
5680; e-mail me.boecom@boeing.com;
Internet https://www.myboeingfleet.com.
(3) You may review copies of the service
information at the FAA, Transport Airplane
Directorate, 1601 Lind Avenue, SW., Renton,
Washington. For information on the
availability of this material at the FAA, call
425–227–1221.
(4) You may also review copies of the
service information that is incorporated by
reference at the National Archives and
Records Administration (NARA). For
information on the availability of this
material at NARA, call 202–741–6030, or go
to: https://www.archives.gov/federal_register/
code_of_federal_regulations/
ibr_locations.html.
[FR Doc. 2010–29792 Filed 11–30–10; 8:45 am]
BILLING CODE 4910–13–P
DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT
24 CFR Part 3500
WReier-Aviles on DSKGBLS3C1PROD with RULES
[Docket No. FR–5425–IA–02]
Real Estate Settlement Procedures Act
(RESPA): Home Warranty Companies’
Payments to Real Estate Brokers and
Agents Interpretive Rule: Response to
Public Comments
Office of General Counsel,
HUD.
Interpretive rule; response to
public comments.
ACTION:
VerDate Mar<15>2010
14:39 Nov 30, 2010
Jkt 223001
For
legal questions, contact Paul S. Ceja,
Assistant General Counsel for RESPA/
SAFE, telephone number 202–708–
3137; or Peter S. Race, Assistant General
Counsel for Compliance, telephone
number 202–708–2350; Department of
Housing and Urban Development, 451
7th Street, SW., Room 9262,
Washington, DC 20410. For other
questions, contact Barton Shapiro,
Director, or Mary Jo Sullivan, Deputy
Director, Office of RESPA and Interstate
Land Sales, Office of Housing,
Department of Housing and Urban
Development, 451 7th Street, SW.,
Room 9158, Washington, DC 20410;
telephone number 202–708–0502. These
telephone numbers are not toll-free.
Persons with hearing or speech
impairments may access these numbers
via TTY by calling the toll-free Federal
Information Relay Service at 1–800–
877–8339.
FOR FURTHER INFORMATION CONTACT:
SUPPLEMENTARY INFORMATION:
I. Background
Issued in Renton, Washington on
November 18, 2010.
Ali Bahrami,
Manager, Transport Airplane Directorate,
Aircraft Certification Service.
AGENCY:
On June 25, 2010, HUD issued
a rule interpreting certain provisions of
RESPA as applied to the payment of fees
to real estate brokers and agents by
home warranty companies. The public
was invited to comment on the
interpretive rule. After reviewing and
considering the comments, HUD
determined that changes are not needed
to the interpretive rule. Through this
document, HUD responds to certain
questions raised in the comments. HUD
believes that its response to these
questions serves to provide additional
guidance relating to matters covered in
the interpretive rule and the comments.
SUMMARY:
The requirements and prohibitions
under RESPA apply to residential real
estate transactions that include a
federally related mortgage loan. Section
8 of RESPA prohibits giving and
receiving ‘‘kickbacks’’ for the referral of
real estate settlement services, and
unearned fees, involving real estate
transactions. Since 1992, HUD’s RESPA
regulations have defined ‘‘settlement
service’’ to include ‘‘homeowner’s
warranties’’. 24 CFR 3500.2(11). While a
referral of settlement services is not
compensable under RESPA, a real estate
broker or agent (or other person in a
position to refer settlement service
business) may be compensated for
services that are actual, necessary and
distinct from the primary services
provided by the real estate broker or
agent, if the services are not nominal,
and the payment is not a duplicative
charge. (See 24 CFR 3500.14(b), (c),
(g)(1), and (g)(3)).
PO 00000
Frm 00014
Fmt 4700
Sfmt 4700
On June 25, 2010 (75 FR 36271), HUD
issued an interpretive rule on the
propriety under Section 8 of RESPA (12
U.S.C. 2607) of payments to real estate
brokers and agents from home warranty
companies (HWCs). The interpretive
rule concluded:
(1) A payment by an HWC for
marketing services performed by real
estate brokers or agents on behalf of the
HWC that are directed to particular
homebuyers or sellers is an illegal
kickback for a referral under section 8;
(2) Depending upon the facts of a
particular case, an HWC may
compensate a real estate broker or agent
for services when those services are
actual, necessary and distinct from the
primary services provided by the real
estate broker or agent, and when those
additional services are not nominal and
are not services for which there is a
duplicative charge; and
(3) The amount of compensation from
the HWC that is permitted under section
8 for such additional services must be
reasonably related to the value of those
services and not include compensation
for referrals of business.
75 FR at 36273.
HUD received 72 comments in
response to publication of the
interpretive rule. HUD reviewed all of
the comments, and appreciates the
input and information provided by the
commenters. Some commenters
supported the interpretive rule and
others did not. HUD found that the
comments that were not supportive of
its interpretation did not present
concerns or information that warrant
any changes to the interpretive rule.
HUD, however, has identified and is
responding to seven specific questions
to provide additional guidance relating
to matters covered in the interpretive
rule and the comments.
II. Questions and Responses
1. Question: Is a home warranty
company’s flat fee payment (e.g.,
monthly or annual payment) to a real
estate broker or agent for marketing a
home warranty product directly to
particular homebuyers or sellers a
permissible payment under section 8 of
RESPA?
HUD Response: No, as provided in the
interpretive rule, payments for
marketing services directed to particular
homebuyers or sellers are considered to
be payments for affirmatively
influencing their choice of settlement
service providers and would therefore
violate section 8 of RESPA as an illegal
kickback for a referral, regardless of
whether the payment is made to the
broker or agent on a ‘‘per transaction’’ or
a ‘‘flat fee’’ basis.
E:\FR\FM\01DER1.SGM
01DER1
WReier-Aviles on DSKGBLS3C1PROD with RULES
Federal Register / Vol. 75, No. 230 / Wednesday, December 1, 2010 / Rules and Regulations
2. Question: Is the list of items in
footnote 2 of the interpretive rule an
exhaustive list of the services that a real
estate broker or agent can be legally
compensated for by a home warranty
company under section 8 of RESPA?
HUD Response: No, the footnote itself
begins with the introduction, ‘‘For
example’’. The list in the footnote is not
exhaustive but exemplary of services
that, in a particular case, may be
compensable. However, as discussed in
the interpretive rule, to be compensable
the services must be services that are
‘‘actual, necessary and distinct from the
primary services provided by the real
estate broker or agent, that are not
nominal, and for which duplicative fees
are not charged’’ (see fn.1 of the
interpretive rule). Referrals of settlement
service business are not compensable
services. Therefore, payments made for
‘‘services’’ that were fabricated to
disguise a payment to a real estate
broker or agent for referrals and are not,
in fact, ‘‘necessary’’ would be illegal
under section 8 of RESPA.
3. Question: What is meant by the
statement in the interpretive rule that
evidence in support of a determination
that compensable services have been
performed by a real estate broker or
agent may include: ‘‘The real estate
broker or agent is by contract the legal
agent of the HWC, and the HWC
assumes responsibility for any
representations made by the broker or
agent about the warranty product.’’
HUD Response: While not conclusive,
the fact that a home warranty company
is willing to be legally committed by the
work and representations of a real estate
broker or agent who is compensated by
the HWC for performing services is one
indicator that those services provided
are ‘‘actual, necessary and distinct’’ and
not nominal—i.e., that actual work is
being performed by the real estate
broker or agent for which the home
warranty company is willing to assume
liability. Specifically, such a legal
relationship indicates that the HWC has
worked with the real estate broker or
agent closely enough to understand the
value of the services performed by the
broker or agent, and to be confident
enough of the broker’s or agent’s
services and representations, that the
HWC is willing to take responsibility for
those services and representations.
Conversely however, if in a contract
with a consumer, for example, the HWC
disclaims liability for acts and
representations of the real estate broker
or agent in connection with the home
warranty, this may indicate that no
actual services of value have been
performed by the real estate broker or
agent.
VerDate Mar<15>2010
14:39 Nov 30, 2010
Jkt 223001
4. Question: Why is it a relevant factor
in analyzing a potential section 8
violation that a home warranty
company’s payment to a real estate
broker or agent was made under an
exclusive-representation arrangement?
HUD Response: Section 8 of RESPA
prohibits payments for referrals and
unearned fees. Stated another way,
referrals are not compensable services
under section 8. See 24 CFR 3500.14(b).
HUD’s interpretive rule states that, in
initially evaluating whether a payment
from an HWC to a real estate broker or
agent is a violation of section 8, HUD
may look at whether the payment is tied
to an arrangement that prohibits the
broker or agent from receiving from a
competitor comparable payment for
comparable actual services. In other
words, such an exclusive-representation
arrangement between the HWC and the
real estate broker or agent is evidence of
an unlawful-payment-for-referral
arrangement whereby the real estate
broker or agent is only being paid for
steering customers exclusively to the
HWC and its products. However, as it is
further noted in the interpretive rule, if
it is determined that the HWC’s
payment is only for compensable
services, the existence of an exclusiverepresentation arrangement would be
permissible under section 8.
5. Question: Does the interpretive rule
prohibit payments from an HWC to real
estate brokers or agents for general
advertising services performed by the
brokers or agents on behalf of the HWC?
HUD Response: No. The interpretive
rule specifically prohibits compensation
for marketing performed by a real estate
broker or agent on behalf of an HWC
when the marketing is directed to
selling the HWC’s home warranty
product to particular homebuyers or
sellers. HUD would evaluate the
permissibility of compensation
provided by an HWC to real estate
brokers or agents for other advertising
by applying the definition of ‘‘referral’’
in § 3500.14(f) of HUD’s RESPA
regulations. For example, a reasonable
payment for an advertisement by an
HWC in a real estate broker’s or agent’s
publication or on the broker’s or agent’s
website would not, in and of itself, be
a payment for a referral under RESPA.
If the marketing services for which the
HWC is paying the real estate broker or
agent are services directed to a
homebuyer or seller that have the effect
of ‘‘affirmatively influencing’’ the
selection by the homebuyer or seller of
the HWC’s home warranty product in
connection with the real estate
settlement, then those marketing
services would be subject to RESPA’s
prohibitions on referral payments.
PO 00000
Frm 00015
Fmt 4700
Sfmt 4700
74621
6. Question: Is a home warranty
always considered to be a ‘‘settlement
service’’ for purposes of RESPA
coverage?
HUD Response: No. RESPA’s kickback
and referral fee prohibitions are
applicable in the context of ‘‘settlement
services’’, a term that is defined broadly
under RESPA and HUD’s RESPA
regulations. RESPA defines ‘‘settlement
services’’ to include ‘‘any service
provided in connection with a real
estate settlement’’ and provides a
nonexclusive listing of such services (12
U.S.C. 2602(3)). In its regulations HUD
has long defined ‘‘settlement service’’ to
include ‘‘any service provided in
connection with a prospective or actual
settlement * * *’’ (24 CFR 3500.2). As
noted above and in the interpretive rule,
‘‘homeowner’s warranties’’ have been
specifically included in HUD’s
definition of ‘‘settlement service’’ since
1992 (24 CFR 3500.2(11)). Therefore,
when a home warranty is ‘‘provided in
connection with a prospective or actual
settlement’’, it is a ‘‘settlement service’’
under HUD’s regulatory interpretation
of RESPA.
In determining whether services
involving a home warranty are provided
in connection with a prospective or
actual settlement, HUD would consider,
among other things: (i) Whether the
charge for the home warranty is paid out
of the proceeds at the settlement; and
(ii) if the charge is not paid at
settlement, whether the timing of the
purchase of and payment for the home
warranty indicates that the purchase is
so removed from the settlement that it
is not provided ‘‘in connection with’’ a
settlement within the meaning of
RESPA and HUD’s regulations. Items
paid in connection with a RESPAcovered transaction, of course, may be
paid and disclosed on the HUD–1/1A
settlement statement as paid outside of
closing (P.O.C.) or through the
accounting at settlement.
7. Question: Does the interpretive rule
apply to situations beyond home
warranty company payments to real
estate brokers and agents, for example to
payments by other settlement service
providers to real estate brokers and
agents?
HUD Response: The interpretive rule
is specifically directed to home
warranty company payments to real
estate brokers and agents. However, the
analysis in the interpretive rule is based
on an interpretation of the RESPA
statute and HUD’s existing regulations,
which analysis may be applicable to
payments made by other settlement
service providers to real estate brokers
or agents.
E:\FR\FM\01DER1.SGM
01DER1
74622
Federal Register / Vol. 75, No. 230 / Wednesday, December 1, 2010 / Rules and Regulations
III. Confirmation of June 25, 2010,
Interpretive Rule
Again, HUD appreciates the input and
information provided by the members of
the public and representatives of
industry who responded to HUD’s
solicitation of public comment on the
June 25, 2010, interpretive rule. After
consideration of the comments, HUD
confirms its June 25, 2010,
interpretation of certain provisions of
RESPA as applied to the payment of fees
to real estate brokers and agents by
home warranty companies. The
interpretive rule therefore stands
without change.
Finally, some commenters asked
whether the interpretive rule has
prospective or retroactive effect. An
interpretive rule does not change
existing law. As noted in the concluding
paragraph of the rule, the interpretive
rule represents HUD’s interpretation of
its existing regulations. This interpretive
rule, therefore, does not constitute a
change in HUD’s interpretation of
RESPA or the RESPA regulations, but is
an articulation of HUD’s interpretation
of RESPA and the implementing
regulations that specifically applies to
home warranty company payments to
real estate brokers and agents.
Authority: 12 U.S.C. 2601–2617; 42 U.S.C.
3535(d).
Dated: November 23, 2010.
Helen R. Kanovsky,
General Counsel.
[FR Doc. 2010–30243 Filed 11–30–10; 8:45 am]
BILLING CODE 4210–67–P
PENSION BENEFIT GUARANTY
CORPORATION
29 CFR Part 4044
Allocation of Assets in SingleEmployer Plans; Valuation of Benefits
and Assets; Expected Retirement Age
Pension Benefit Guaranty
Corporation.
ACTION: Final rule.
AGENCY:
This rule amends Pension
Benefit Guaranty Corporation’s
regulation on Allocation of Assets in
Single-Employer Plans by substituting a
new table for determining expected
retirement ages for participants in
pension plans undergoing distress or
involuntary termination with valuation
dates falling in 2011. This table is
needed in order to compute the value of
early retirement benefits and, thus, the
total value of benefits under a plan.
WReier-Aviles on DSKGBLS3C1PROD with RULES
SUMMARY:
VerDate Mar<15>2010
14:39 Nov 30, 2010
Jkt 223001
DATES:
Effective Date: January 1, 2011.
FOR FURTHER INFORMATION CONTACT:
Catherine B. Klion, Manager, Regulatory
and Policy Division, Legislative and
Regulatory Department, Pension Benefit
Guaranty Corporation, 1200 K Street,
NW., Washington, DC 20005, 202–326–
4024. (TTY/TDD users may call the
Federal relay service toll-free at 1–800–
877–8339 and ask to be connected to
202–326–4024.)
SUPPLEMENTARY INFORMATION: Pension
Benefit Guaranty Corporation (PBGC)
administers the pension plan
termination insurance program under
Title IV of the Employee Retirement
Income Security Act of 1974 (ERISA).
PBGC’s regulation on Allocation of
Assets in Single-Employer Plans (29
CFR part 4044) sets forth (in subpart B)
the methods for valuing plan benefits of
terminating single-employer plans
covered under Title IV. Guaranteed
benefits and benefit liabilities under a
plan that is undergoing a distress
termination must be valued in
accordance with subpart B of part 4044.
In addition, when PBGC terminates an
underfunded plan involuntarily
pursuant to ERISA section 4042(a), it
uses the subpart B valuation rules to
determine the amount of the plan’s
underfunding.
Under § 4044.51(b) of the asset
allocation regulation, early retirement
benefits are valued based on the annuity
starting date, if a retirement date has
been selected, or the expected
retirement age, if the annuity starting
date is not known on the valuation date.
Sections 4044.55 through 4044.57 set
forth rules for determining the expected
retirement ages for plan participants
entitled to early retirement benefits.
Appendix D of part 4044 contains tables
to be used in determining the expected
early retirement ages.
Table I in appendix D (Selection of
Retirement Rate Category) is used to
determine whether a participant has a
low, medium, or high probability of
retiring early. The determination is
based on the year a participant would
reach ‘‘unreduced retirement age’’ (i.e.,
the earlier of the normal retirement age
or the age at which an unreduced
benefit is first payable) and the
participant’s monthly benefit at
unreduced retirement age. The table
applies only to plans with valuation
dates in the current year and is updated
annually by the PBGC to reflect changes
in the cost of living, etc.
Tables II–A, II–B, and II–C (Expected
Retirement Ages for Individuals in the
Low, Medium, and High Categories
PO 00000
Frm 00016
Fmt 4700
Sfmt 4700
respectively) are used to determine the
expected retirement age after the
probability of early retirement has been
determined using Table I. These tables
establish, by probability category, the
expected retirement age based on both
the earliest age a participant could retire
under the plan and the unreduced
retirement age. This expected retirement
age is used to compute the value of the
early retirement benefit and, thus, the
total value of benefits under the plan.
This document amends appendix D to
replace Table I–10 with Table I–11 in
order to provide an updated correlation,
appropriate for calendar year 2011,
between the amount of a participant’s
benefit and the probability that the
participant will elect early retirement.
Table I–11 will be used to value benefits
in plans with valuation dates during
calendar year 2011.
PBGC has determined that notice of
and public comment on this rule are
impracticable and contrary to the public
interest. Plan administrators need to be
able to estimate accurately the value of
plan benefits as early as possible before
initiating the termination process. For
that purpose, if a plan has a valuation
date in 2011, the plan administrator
needs the updated table being
promulgated in this rule. Accordingly,
the public interest is best served by
issuing this table expeditiously, without
an opportunity for notice and comment,
to allow as much time as possible to
estimate the value of plan benefits with
the proper table for plans with valuation
dates in early 2011.
PBGC has determined that this action
is not a ‘‘significant regulatory action’’
under the criteria set forth in Executive
Order 12866.
Because no general notice of proposed
rulemaking is required for this
regulation, the Regulatory Flexibility
Act of 1980 does not apply (5 U.S.C.
601(2)).
List of Subjects in 29 CFR Part 4044
Pension insurance, Pensions.
In consideration of the foregoing, 29
CFR part 4044 is amended as follows:
■ 1. The authority citation for part 4044
continues to read as follows:
■
Authority: 29 U.S.C. 1301(a), 1302(b)(3),
1341, 1344, 1362.
2. Appendix D to part 4044 is
amended by removing Table I–10 and
adding in its place Table I–11 To read
as follows:
■
Appendix D to Part 4044—Tables Used
To Determine Expected Retirement Age
E:\FR\FM\01DER1.SGM
01DER1
]]>Agencies
[Federal Register Volume 75, Number 230 (Wednesday, December 1, 2010)]
[Rules and Regulations]
[Pages 74620-74622]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-30243]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-5425-IA-02]
Real Estate Settlement Procedures Act (RESPA): Home Warranty
Companies' Payments to Real Estate Brokers and Agents Interpretive
Rule: Response to Public Comments
AGENCY: Office of General Counsel, HUD.
ACTION: Interpretive rule; response to public comments.
-----------------------------------------------------------------------
SUMMARY: On June 25, 2010, HUD issued a rule interpreting certain
provisions of RESPA as applied to the payment of fees to real estate
brokers and agents by home warranty companies. The public was invited
to comment on the interpretive rule. After reviewing and considering
the comments, HUD determined that changes are not needed to the
interpretive rule. Through this document, HUD responds to certain
questions raised in the comments. HUD believes that its response to
these questions serves to provide additional guidance relating to
matters covered in the interpretive rule and the comments.
FOR FURTHER INFORMATION CONTACT: For legal questions, contact Paul S.
Ceja, Assistant General Counsel for RESPA/SAFE, telephone number 202-
708-3137; or Peter S. Race, Assistant General Counsel for Compliance,
telephone number 202-708-2350; Department of Housing and Urban
Development, 451 7th Street, SW., Room 9262, Washington, DC 20410. For
other questions, contact Barton Shapiro, Director, or Mary Jo Sullivan,
Deputy Director, Office of RESPA and Interstate Land Sales, Office of
Housing, Department of Housing and Urban Development, 451 7th Street,
SW., Room 9158, Washington, DC 20410; telephone number 202-708-0502.
These telephone numbers are not toll-free. Persons with hearing or
speech impairments may access these numbers via TTY by calling the
toll-free Federal Information Relay Service at 1-800-877-8339.
SUPPLEMENTARY INFORMATION:
I. Background
The requirements and prohibitions under RESPA apply to residential
real estate transactions that include a federally related mortgage
loan. Section 8 of RESPA prohibits giving and receiving ``kickbacks''
for the referral of real estate settlement services, and unearned fees,
involving real estate transactions. Since 1992, HUD's RESPA regulations
have defined ``settlement service'' to include ``homeowner's
warranties''. 24 CFR 3500.2(11). While a referral of settlement
services is not compensable under RESPA, a real estate broker or agent
(or other person in a position to refer settlement service business)
may be compensated for services that are actual, necessary and distinct
from the primary services provided by the real estate broker or agent,
if the services are not nominal, and the payment is not a duplicative
charge. (See 24 CFR 3500.14(b), (c), (g)(1), and (g)(3)).
On June 25, 2010 (75 FR 36271), HUD issued an interpretive rule on
the propriety under Section 8 of RESPA (12 U.S.C. 2607) of payments to
real estate brokers and agents from home warranty companies (HWCs). The
interpretive rule concluded:
(1) A payment by an HWC for marketing services performed by real
estate brokers or agents on behalf of the HWC that are directed to
particular homebuyers or sellers is an illegal kickback for a referral
under section 8;
(2) Depending upon the facts of a particular case, an HWC may
compensate a real estate broker or agent for services when those
services are actual, necessary and distinct from the primary services
provided by the real estate broker or agent, and when those additional
services are not nominal and are not services for which there is a
duplicative charge; and
(3) The amount of compensation from the HWC that is permitted under
section 8 for such additional services must be reasonably related to
the value of those services and not include compensation for referrals
of business.
75 FR at 36273.
HUD received 72 comments in response to publication of the
interpretive rule. HUD reviewed all of the comments, and appreciates
the input and information provided by the commenters. Some commenters
supported the interpretive rule and others did not. HUD found that the
comments that were not supportive of its interpretation did not present
concerns or information that warrant any changes to the interpretive
rule. HUD, however, has identified and is responding to seven specific
questions to provide additional guidance relating to matters covered in
the interpretive rule and the comments.
II. Questions and Responses
1. Question: Is a home warranty company's flat fee payment (e.g.,
monthly or annual payment) to a real estate broker or agent for
marketing a home warranty product directly to particular homebuyers or
sellers a permissible payment under section 8 of RESPA?
HUD Response: No, as provided in the interpretive rule, payments
for marketing services directed to particular homebuyers or sellers are
considered to be payments for affirmatively influencing their choice of
settlement service providers and would therefore violate section 8 of
RESPA as an illegal kickback for a referral, regardless of whether the
payment is made to the broker or agent on a ``per transaction'' or a
``flat fee'' basis.
[[Page 74621]]
2. Question: Is the list of items in footnote 2 of the interpretive
rule an exhaustive list of the services that a real estate broker or
agent can be legally compensated for by a home warranty company under
section 8 of RESPA?
HUD Response: No, the footnote itself begins with the introduction,
``For example''. The list in the footnote is not exhaustive but
exemplary of services that, in a particular case, may be compensable.
However, as discussed in the interpretive rule, to be compensable the
services must be services that are ``actual, necessary and distinct
from the primary services provided by the real estate broker or agent,
that are not nominal, and for which duplicative fees are not charged''
(see fn.1 of the interpretive rule). Referrals of settlement service
business are not compensable services. Therefore, payments made for
``services'' that were fabricated to disguise a payment to a real
estate broker or agent for referrals and are not, in fact,
``necessary'' would be illegal under section 8 of RESPA.
3. Question: What is meant by the statement in the interpretive
rule that evidence in support of a determination that compensable
services have been performed by a real estate broker or agent may
include: ``The real estate broker or agent is by contract the legal
agent of the HWC, and the HWC assumes responsibility for any
representations made by the broker or agent about the warranty
product.''
HUD Response: While not conclusive, the fact that a home warranty
company is willing to be legally committed by the work and
representations of a real estate broker or agent who is compensated by
the HWC for performing services is one indicator that those services
provided are ``actual, necessary and distinct'' and not nominal--i.e.,
that actual work is being performed by the real estate broker or agent
for which the home warranty company is willing to assume liability.
Specifically, such a legal relationship indicates that the HWC has
worked with the real estate broker or agent closely enough to
understand the value of the services performed by the broker or agent,
and to be confident enough of the broker's or agent's services and
representations, that the HWC is willing to take responsibility for
those services and representations. Conversely however, if in a
contract with a consumer, for example, the HWC disclaims liability for
acts and representations of the real estate broker or agent in
connection with the home warranty, this may indicate that no actual
services of value have been performed by the real estate broker or
agent.
4. Question: Why is it a relevant factor in analyzing a potential
section 8 violation that a home warranty company's payment to a real
estate broker or agent was made under an exclusive-representation
arrangement?
HUD Response: Section 8 of RESPA prohibits payments for referrals
and unearned fees. Stated another way, referrals are not compensable
services under section 8. See 24 CFR 3500.14(b). HUD's interpretive
rule states that, in initially evaluating whether a payment from an HWC
to a real estate broker or agent is a violation of section 8, HUD may
look at whether the payment is tied to an arrangement that prohibits
the broker or agent from receiving from a competitor comparable payment
for comparable actual services. In other words, such an exclusive-
representation arrangement between the HWC and the real estate broker
or agent is evidence of an unlawful-payment-for-referral arrangement
whereby the real estate broker or agent is only being paid for steering
customers exclusively to the HWC and its products. However, as it is
further noted in the interpretive rule, if it is determined that the
HWC's payment is only for compensable services, the existence of an
exclusive-representation arrangement would be permissible under section
8.
5. Question: Does the interpretive rule prohibit payments from an
HWC to real estate brokers or agents for general advertising services
performed by the brokers or agents on behalf of the HWC?
HUD Response: No. The interpretive rule specifically prohibits
compensation for marketing performed by a real estate broker or agent
on behalf of an HWC when the marketing is directed to selling the HWC's
home warranty product to particular homebuyers or sellers. HUD would
evaluate the permissibility of compensation provided by an HWC to real
estate brokers or agents for other advertising by applying the
definition of ``referral'' in Sec. 3500.14(f) of HUD's RESPA
regulations. For example, a reasonable payment for an advertisement by
an HWC in a real estate broker's or agent's publication or on the
broker's or agent's website would not, in and of itself, be a payment
for a referral under RESPA. If the marketing services for which the HWC
is paying the real estate broker or agent are services directed to a
homebuyer or seller that have the effect of ``affirmatively
influencing'' the selection by the homebuyer or seller of the HWC's
home warranty product in connection with the real estate settlement,
then those marketing services would be subject to RESPA's prohibitions
on referral payments.
6. Question: Is a home warranty always considered to be a
``settlement service'' for purposes of RESPA coverage?
HUD Response: No. RESPA's kickback and referral fee prohibitions
are applicable in the context of ``settlement services'', a term that
is defined broadly under RESPA and HUD's RESPA regulations. RESPA
defines ``settlement services'' to include ``any service provided in
connection with a real estate settlement'' and provides a nonexclusive
listing of such services (12 U.S.C. 2602(3)). In its regulations HUD
has long defined ``settlement service'' to include ``any service
provided in connection with a prospective or actual settlement * * *''
(24 CFR 3500.2). As noted above and in the interpretive rule,
``homeowner's warranties'' have been specifically included in HUD's
definition of ``settlement service'' since 1992 (24 CFR 3500.2(11)).
Therefore, when a home warranty is ``provided in connection with a
prospective or actual settlement'', it is a ``settlement service''
under HUD's regulatory interpretation of RESPA.
In determining whether services involving a home warranty are
provided in connection with a prospective or actual settlement, HUD
would consider, among other things: (i) Whether the charge for the home
warranty is paid out of the proceeds at the settlement; and (ii) if the
charge is not paid at settlement, whether the timing of the purchase of
and payment for the home warranty indicates that the purchase is so
removed from the settlement that it is not provided ``in connection
with'' a settlement within the meaning of RESPA and HUD's regulations.
Items paid in connection with a RESPA-covered transaction, of course,
may be paid and disclosed on the HUD-1/1A settlement statement as paid
outside of closing (P.O.C.) or through the accounting at settlement.
7. Question: Does the interpretive rule apply to situations beyond
home warranty company payments to real estate brokers and agents, for
example to payments by other settlement service providers to real
estate brokers and agents?
HUD Response: The interpretive rule is specifically directed to
home warranty company payments to real estate brokers and agents.
However, the analysis in the interpretive rule is based on an
interpretation of the RESPA statute and HUD's existing regulations,
which analysis may be applicable to payments made by other settlement
service providers to real estate brokers or agents.
[[Page 74622]]
III. Confirmation of June 25, 2010, Interpretive Rule
Again, HUD appreciates the input and information provided by the
members of the public and representatives of industry who responded to
HUD's solicitation of public comment on the June 25, 2010, interpretive
rule. After consideration of the comments, HUD confirms its June 25,
2010, interpretation of certain provisions of RESPA as applied to the
payment of fees to real estate brokers and agents by home warranty
companies. The interpretive rule therefore stands without change.
Finally, some commenters asked whether the interpretive rule has
prospective or retroactive effect. An interpretive rule does not change
existing law. As noted in the concluding paragraph of the rule, the
interpretive rule represents HUD's interpretation of its existing
regulations. This interpretive rule, therefore, does not constitute a
change in HUD's interpretation of RESPA or the RESPA regulations, but
is an articulation of HUD's interpretation of RESPA and the
implementing regulations that specifically applies to home warranty
company payments to real estate brokers and agents.
Authority: 12 U.S.C. 2601-2617; 42 U.S.C. 3535(d).
Dated: November 23, 2010.
Helen R. Kanovsky,
General Counsel.
[FR Doc. 2010-30243 Filed 11-30-10; 8:45 am]
BILLING CODE 4210-67-P
