January 20, 2009
The American Land Title Association entered the fray this week when CEO Kurt Pfotenhauer penned a letter to the Department of Housing and Urban Development noting that it had come to his attention that HUD contracts with specific preferred providers of title and closings services of HUD owned properties, including title examination and insurance.
“While HUD does not explicitly ban consumers from choosing their own closing agents, the fact that HUD requires them to pay twice for the same service creates such an enormous disincentive that he effect is the same. As a practical matter, HUD is directing title services and is therefore violating RESPA. Given HUD’s example, it is not surprising that many lenders have also assumed this practice on their bank owned real estate.”
The practice of directing REO work is coming under increasing heat by title agents who feel they are losing out on the greatest potential for new business due to an industry custom that agents say tie up the business in violation of RESPA.