Mortgage Bankers Applaud Investigation of Builders’ RESPA Violations

RISMEDIA, April 11, 2007-The National Association of Mortgage Bankers (NAMB) applauded HUD, the FBI and other state and federal agencies for moving to protect consumers from illegal lending practices by some builders' in-house or affiliated mortgage companies.

"No one questions the legality of properly managed affiliated businesses," said NAMB Vice President, Marc Savitt, "but we have come across many instances like those coming to light against Beazer Homes and Ryan Homes, and I know for a fact, we're just looking at the tip of the iceberg in terms of the fraud committed."

Most home builders offer financing to home buyers through their in-house or affiliated mortgage companies. These affiliated companies capture about 90% of new home loans.

Very often, these companies use an assortment of tactics to keep home buyers from shopping for better financing terms. Sometimes they offer builder incentives or discounts, which are often made up elsewhere in the transaction. In some cases, as was alleged against Ryan Homes recently, the homebuilder and its affiliated lender used significant pressure on the home buyer to accept mortgage financing even after they acknowledged the buyer wasn't qualified. Both of these examples violate the Real Estate Settlement Procedures Act (RESPA), enacted to protect home buyers.

NAMB's Consumer Protection Committee, chaired by Kate Crawford, has been working for over two years to bring this behavior to light, and in the last three months alone has been directly responsible for the recovery of over $75,000 in consumer home deposits.

"While it is gratifying to see progress being made," Savitt said, "I urge enforcement agencies in all 50 states to look into complaints waged against builders in your areas. The problems are rampant," he concluded, "if we are to protect home buyers, we need regulators and law enforcement agencies to be vigilant in enforcing RESPA and other consumer protection laws."