Office of the Assistant Secretary for HousingFederal Housing Commissioner; Amendments to Regulation X, the Real Estate Settlement Procedures Act: Withdrawal of Employer-Employee and Computer Loan Origination Systems (CLOs) Exemptions

In this final rule, the Department of Housing and Urban Development is revising Regulation X, which implements the Real Estate Settlement Procedures Act of 1974 (RESPA). This rule completes a process that started with a public hearing and comment period on August 6, 1993, followed by a proposed rule published on July 21, 1994. In the interest of protecting consumers from practices prohibited by RESPA, while making available to consumers the potential benefits of innovative business arrangements, this rule withdraws an exemption for employer-employee payments, introduces two more-limited exemptions for payments that would otherwise be prohibited by the statute--employer payments to managerial employees and employees who do not perform settlement services in any transaction. In addition, to relieve any uncertainty, the rule adds an additional exemption to clarify that payments made to an employer's own bona fide employee for generating business for that employer are permissible. The rule also revises certain controlled business disclosure requirements. HUD has chosen to use its exemption authority under Section 8(c)(5) of RESPA, having consulted with other Federal agencies as required by that provision, as well as the authority under Section 19(a) of RESPA, to permit these payments. The rule also withdraws an exemption for payments made by borrowers for computer loan origination (CLO) services, because the exemption was found to be of little benefit to consumers or the loan origination industry. However, in order to assure that consumers in the mortgage lending marketplace continue to benefit from technological innovation, simultaneously with the publication of this rule, the Department is issuing a Statement of Policy analyzing payments for CLOs under the RESPA regulations. In addition, the Department is simultaneously publishing two other Statements of Policy on issues raised by comments on the proposed rule, although not directly related to the proposed rule, and w