Ex-HUD Official Talks

Over the past year, we have published articles and white papers written by investigative journalists, the National Association of Realtors' legal counsel and our editorial comments.

Now hear from an Ex-HUD Insider who was responsible for investigating hundreds of RESPA violations and negotiated the settlement of over $10 billion dollars in fines with 12 of the largest lenders in the US.

Dr. Gary Lacefield was a HUD Senior Investigator for the Southwest Region of the country and left in 1999. After leaving HUD, his consulting practice has counseled some of the largest mortgage companies on RESPA issues. He has created online training videos for loan officers and real estate agents, which we will reveal in the article.

Be sure to look for Dr. Lacefield's column called "Ask the RESPA Expert" in upcoming issues.

Karen: I started my mortgage career in 1972, prior to the Real Estate Settlement and Procedures Act being passed and back then, referral kickbacks were the normal way of doing business. In your opinion, what was the reason for the law in the first place?

Dr. Lacefield: The intent was 2-fold. First, there were fees paid to settlement service providers OUTSIDE the closing transaction. Everyone had their own closing statement and nothing was uniform in nature. The HUD 1 was created to be the universal settlement statement and lenders were required to disclose all settlement charges.

Secondly, it was created to "level the playing field" because in the past, those with the most money, who could afford to pay higher referral fees, were the ones who got the business.

In either case, consumers were paying for it one way or the other and the Fair Housing Act was a consumer protection law.

Karen: What does the Fair Housing Act have to do with RESPA?

Dr. Lacefield: HUD is the lead regulatory agency that enforces RESPA, the Fair Housing Act and all FHA insured loans and non-government lending as well as Predatory Lending Practices. Some laws cross-reference each other.

Karen: How does HUD determine whom to investigate?

Karen: It seems to me that lenders and realtors are becoming more aware of the kickback laws and some of them just didn't know any better. However, in my attempts to discuss the issue with the National Home Builders Association, they don't seem to think it's an issue at all.

Dr. Lacefield: Builders for some reason don't think the law applies to them however, I'll refer you to the case of a builder in Tulsa, Oklahoma who paid $450,000 dollars in fines related to "sham" business arrangements with a real estate company and title company. The law applies to everyone who, and I quote, "is in a position to refer settlement services". I have seen where builders require the customer to use only one lender or Title Company and while it may not be illegal with the proper affiliated business arrangements as outlined by HUD, it is covered by other laws when the builder increases the price of the home if the buyer DOES NOT use the settlement provider. (Subscribers, download the complete details of the Tulsa RESPA violations, and the HUD settlement that followed.)

Karen: You have been consulting Loan Officers and Realtors® for the past several years and you now have a FREE website where loan originators can view several, short 5-8 minute segments where you answer some of the most frequently asked questions on what IS and IS NOT considered a violation. What is that website?

Dr. Lacefield: Right now we have 4 online videos and plan to add a few more each month. It's great training for loan officers because just one violation, by just one loan officer can bring down the whole company.

Continue this story on the next page to view the website and more question and answers with Dr. Gary Lacefield.

Read More