October Research, LLC’s complimentary webinar, “Protecting the Consumer: RESPA Section 9,” showcased the importance of complying with the other “required use” under RESPA.
“RESPA Section 8 gets so much play and people often forget about Section 9,” Franzen & Salzano President Loretta Salzano said.
Mayer Brown Partner Holly Spencer Bunting joined Salzano on the webinar, which was moderated by Mary Schuster, RamQuest’s executive vice president and chief product officer.
“Today what we’re really talking about is ‘required use,’ and ‘required use’ is prohibited twice in RESPA – certainly in Section 9,” Salzano said. “But it also appears in the affiliated business arrangement safe harbor – which is an exception from the prohibition in RESPA Section 8.”
Required use is defined in 12 CFR 1024.2 (b) as: a situation in which a person must use a particular settlement service provider in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service. However, the offering of a package (or combination of settlement services or the offering of discounts or rebates to consumers for the purchase of multiple settlement services does not constitute a required use. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices that are otherwise generally available, and must not be made up by higher costs elsewhere in the settlement process.
In the case of Section 9, “the crux of it is the seller must not require the buyer to buy title insurance from the seller’s chosen title company,” Salzano said.
Bunting said it’s case specific whether an economic incentive amounts to required use.
“While Section 9 seems pretty black and white, it does raise the question of whether or not economic incentives offered to consumers make consumers feel like they may not have another choice if they want to save money,” Bunting said. “Does that situation amount to required use?”
If a seller violates Section 9, the seller can be liable to the buyer to three times actual charges paid by the buyer for title insurance. The Consumer Financial Protection Bureau, state attorneys general and state insurance commissioners may bring public action against the seller for Section 9 violations.
Bunting also discussed Section 8’s anti-kickback prohibition under RESPA.
Visit RESPA News to view “Protecting the Consumer: RESPA Section 9.”