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HUD Halts Abusive Home-builder Practices

The Housing and Urban Development better known as HUD has finally halted abusive practices by home-builders in which they would revoke huge buyer incentives for not using their preferred/affiliated mortgage company. When a colleague of mine Tom Burris shared this with me, I was jumping up and down in excitement. Over the last 2 years I have written 4 posts about this abusive behavior.

Are Builders Violating RESPA with Using In-House Lending?
Home-builders and Abusive Practices
Should I use the Home Builders Lender?
I decided to try and take some action against Home-builders and Abusive Practices

Effective Jan. 16, 2009 a new home builder can no longer use "disincentives" to steer their customers to their preferred mortgage company. HUD Halts Abusive Home-builder Practrices (read further)

Posted by Gary Miljour - Mortgage Lending for Tempe Arizona on 12/14/2008 10:34 PM

Comments (14)

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14 Comments on HUD Halts Abusive Home-builder Practices

DEC

Gary.... this is a great start.... but they need to jump on the realtors next. Why isn't this something that has happened in the last 2 years. How many one-stop shopes are with a major real estate office? isn't that basically the same as what the builders did? Sure, the builders offered incentives.... but the realtors, not all, steer their clients... Why is it taking so long? Money? The gov't? etc etc.

jeff belonger

DEC

Gary - Initial reaction = About time. "Incentives" seem to be a bad way to do business in my book. Sure, I romanticize about mafia-like story lines, but they rarely define what we are all about. Ethics will always be an issue when money is concerned. I don't like it and hope to never practice it, yet I'm seeing it as the reality of the world in which we live. Time to change the world.

Jeff,

You bring up a good argument, I went into a real estate office the other day to meet one of my agents that I partner with and his broker had the attitude to run me out of there because I was not their "preferred lender/partner/aba/joint venture". I found out after talking to my agent partner that no one uses the real estate companies lender because the service is horrible.

Is this best for the client and the real question is who is making the money. Always follow the money. Again they are steering plain and simple regardless of what is best for the consumer.

Mr. Sardi,

You stated "Time to change the world"

I have to agree with you 100%. I have wondered why, You, Jeff and many others like myself get it but so many in our business do not. I feel our organizations such as Mortgage Bankers Association, Mortgage Lenders Associations and the Mortgage Brokers Associations have been weak on bringing these issues to the forefront. When you follow the money, we have businesses out there that own both real estate and lending outfits. Now the government is going to step in and make the rules and we all are not going to be happy with the outcome. I know the real estate outfits preach that consumers want a one stop shop, but at what price to the consumer. We have seen where the one stop shop has gotten us so far over the last couple of years. This sounds good on paper but when applied to the real world, it just does not work. Because of the complexity of mortgage lending, it cannot and will not ever be done by a real estate agent and most states are creating laws that will not allow real estate agents to sell both services. Oh I could on and on all day long about this can of worms Jeff opened up, but I will stop here and wait for further comments.

Gary - Fantastic information. As a loan officer that worked for an inhouse lender, I didn't get any breaks, but I know some that were really pushed on the inhouse person. Thanks for this update.

It's about darn tootin time! Gary, I hadn't seen this information released yet, so I'm thrilled you told us about it. Thank you!

This is a big win for the consumer. I have actually seen people take a higher rate to get their 'free' upgrades.

Thing is.... they end up paying for the upgrades many times in extra interest payments over the life of th loan.

Fred,

You are welcome.

Kris,

I agree it was very overdue.

Tom,

I saw the same, and it made me sick to my stomach. Like $10K for flooring that you can by at Lowe's for $2,500.00 installed?

Thanks again for all the comments

As a Realtor, mortgage lender and builder, I see too much of the bad side of referrals. The consumer has been getting ripped off for years.

DEC

Guys and gals help me out here.

I read the same thing you all have, but all I see is that the builder has to show the credit coming from the lending affiliate instead of directly from them. I agree it will require contract changes but will it stop the practice?

In the end, the lending affiliate's balance sheet will take a hit, but the profit will be made up by the builder/parent company. Do any of you agree?

Gerry Suarez, Jr.

Your FHA Loan Pro!

DEC

Gerry,

You make a very valid point, I will share this with our group. I hope this is not another loop hole.

Gerry

I am sure that many builders now have their lawyers going over the ruling to try and skirt the rules yet again.

DEC

You guys know I work with a bunch of these guys/gals (builders). The funniest thing about the new rule is it reinforces my position as an autonomous preferred lender for a bunch of builders. They pay additional closing costs on the deal if the borrower uses me because they know I do a good clean job. Since we're not affiliated, this rule goes right over our heads!

Gotta love how ineffective government can be sometimes!

Gerry Suarez, Jr.

Your FHA Loan Pro!

Tom, I have to agree, the system just needs to allow the consumer to have real choices that is all.

Gerry,

You stated, They pay additional closing costs on the deal if the borrower uses me because they know I do a good clean job. Since we're not affiliated, this rule goes right over our heads!

I think I and many lenders might be ok with that to a point, because that shows the the builder is not getting some type of round about way kickback. Also I have no problem competing with another lender, as long as that lender can give the client the product they want with competitive pricing and rates. It sounds like you offer that, but I have known in the past here in Arizona where builder lenders (true ABA's) would let their lender arm put the client into any product at any cost.

That is where I have a huge problem with the set-up.

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