Ruth A. Dillingham
HUD’s commitment shows

Since taking over as secretary of the U.S. Department of Housing and Urban Development in January 2001, Mel Martinez has pledged to vigorously pursue those that would take advantage of consumers, even going so far as hiring ex-Secret Service and Federal Bureau of Investigations agents to do it.

In September, HUD contracted with the Fairfax, Va.-based Technical Analysis Center to pursue complaints regarding violations of the Real Estate Settlement and Procedures Act. The contract was for an initial six-month period and marked the first time the agency has made an agreement with outside contractors to go after violators, said HUD spokesman Brian Sullivan.

“You could say this signals the importance that Secretary Martinez places on enforcing the provisions of the Real Estate Settlement Procedures Act,” said Sullivan regarding the timing of the contract.

The contract provides investigative services for both RESPA and the Interstate Land Act. In an April 11 speech before the Real Estate Services Providers Council, Ivy Jackson, acting director of HUD’s Interstate Land Sales and RESPA Enforcement Division, said the initial contract cost $250,000.

“It is HUD’s intent to continue to contract for investigative services,” said Jackson. The new contract will provide services for another year with an option for two more years at a total cost of $1.5 million.

While contract negotiations are ongoing, Sullivan said he couldn’t discuss most aspects of the service received by HUD from the Technical Analysis Center. Efforts to reach the Technical Analysis Center were unsuccessful.

Aggressive Laws

Sullivan refused to speak about the success of TAC in the first six months, citing contract negotiations. “Suffice it to say that within any HUD program, if an existing grantee is seeking to renew a contract, past performance is a measure – but that’s the process that’s playing out right now,” he said, adding that HUD will continue to refine enforcement measures for the contractors.

According to Jackson, all but two of the TAC investigators are former federal agents from the U.S. Customs Service, the Internal Revenue Service’s Criminal Division, the Federal Bureau of Investigation and the Secret Service.

Sullivan also refused to disclose how much effort was concentrated in the New England area. “We really don’t comment on future investigative activity for the obvious reasons. You don’t expose your methodologies … except to say that Secretary Martinez has made it a top priority to work closely with the banking and real estate industries to protect the interest of the consumers in the homebuying process and, where necessary, vigorously enforce the law,” he said.

According to Sullivan, in the past three years HUD has received 188 complaints involving banks and other real estate entities in Massachusetts. While other areas of the country may have more violations, it would be inaccurate to say those areas are more problematic simply because of the multiple factors involved, he said.

California and Florida show more activity than other states, but they are larger, more populous and have robust real estate markets, Sullivan said. Additionally, complaints received from one state may be about a service provider located in another state. So the actual numbers are skewed. “You also have to consider that many states have very aggressive consumer protection laws on the books. They may be enforcing their own laws at the local level very aggressively in one state. These complaints never reach HUD because they’ve been adjudicated on the state level,” he said.

TAC investigators are contracted to look into violations of Sections 8 and 9 of RESPA, meaning those that allegedly get an illegal fee or kickback in exchange for referring business to the lenders and lenders that illegally require a consumer to use a particular title insurance company.

According to Jackson, 34 percent of consumer complaints and 15 percent of industry complaints fell into Section 8 violations while 2 percent of consumer and 5 percent of industry complaints fell into Section 9.

Jackson also announced that in March and April, three new staff members devoted primarily to the enforcement of RESPA were added – and she expects to hire still more staff in the next few months. She also plans to coordinate with general council staff and the other agencies for investigative efforts.

“I think it really shows a commitment by HUD on enforcement,” said Ruth A. Dillingham, special counsel at Boston-based Lenders Advantage. “But since we haven’t seen publicly, at any rate, what kinds of enforcement actions they are going to issue, it’s hard as an industry to guess where they’re going to go.”

There’s so much going on with RESPA compliance right now, said Dillingham, in terms of class actions, statement of policy and the beefed-up enforcement at HUD that “it will be very interesting in figuring out what the issues lenders really have to be alert to are going to be.”