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Compliance Corner: Second Quarter 2002

HUD Clarifies Policy on Lender Payments to Mortgage Brokers

On October 18, 2001, the Department of Housing and Urban Development (HUD) issued RESPA Statement of Policy 2001-1 (SOP 2001-1), Clarification Regarding Lender Payments to Mortgage Brokers. SOP 2001-1 clarified Statement of Policy 1999-1, which sets forth HUD's position on the legality of lender payments to mortgage brokers in connection with federally related mortgage loans. HUD issued Statement of Policy 2001-1 to eliminate ambiguities concerning its position on yield spread premiums and overcharges by settlement service providers. The new policy became effective immediately.

SOP 2001-1 reiterates HUD's position that yield spread premiums are not per se legal or illegal and clarifies the test for the legality of such payments set forth in the 1999 Statement of Policy. HUD also reiterated its long-standing position that it may violate Section 8(b) and HUD's implementing regulations if:

  • Two or more persons split a fee for settlement services, any portion of which is unearned;
  • One settlement service provider marks-up the cost of the services performed or goods provided by another settlement service provider without providing additional actual, necessary, and distinct services, goods, or facilities to justify the additional charge;
  • One settlement service provider charges the consumer a fee where no, nominal, or duplicative work is done, or the fee is in excess of the reasonable value of goods or facilities provided or the services actually performed.

SOP 2001-1 also reiterates the importance of disclosure so that borrowers can choose the best loan for themselves, and it describes disclosures that HUD considers best practices.

Links to HUD's RESPA Statements of Policy are available on HUD's website External Link.

The views expressed in this article are those of the author and are not necessarily those of this Reserve Bank or the Federal Reserve System.