16 CFR Parts 317 and 318: Mortgage Assistance Relief Services Rulemaking #542309-00043

Submission Number:
Charles McMillan
National Association of Realtors
Initiative Name:
16 CFR Parts 317 and 318: Mortgage Assistance Relief Services Rulemaking
July 15, 2009 Submitted electronically via www.regulations.gov Federal Trade Commission Office of the Secretary Room H-135 (Annex W) 600 Pennsylvania Avenue, NW Washington, DC 20580 Re: Mortgage Assistance Relief Services Rulemaking, Rule No. R911003 Dear Mr. Secretary: On behalf of the 1.1 million members of the National Association of REALTORS (NAR), I am pleased to provide comments on the Federal Trade Commission's Advance Notice of Proposed Rulemaking, request for comment regarding mortgage assistance relief services. The National Association of REALTORS (NAR) is America's largest trade association, including NAR's five commercial real estate institutes and its societies and councils. REALTORS are involved in all aspects of the residential and commercial real estate industries and belong to one or more of some 1,400 local associations or boards, and 54 state and territory associations of REALTORS. In this comment letter, NAR will limit its comments to one of the FTC's specific questions raised in the FTC's Advanced Notice of Proposed Rulemaking: Mortgage Assistance Relief Services: Should the Commission impose fee restrictions in a proposed FTC rule other than a ban on the advance fees that providers of loan modification and foreclosure rescue services receive? If so, what restriction should be imposed and why? NAR believes the Commission should impose fee restrictions in a proposed FTC rule that prohibits providers of loan modification and foreclosure rescue services from receiving referral fees and/or splits of fees or commissions from mortgage lenders, brokers, builders, or real estate sales agents or brokers. The Department of Housing and Urban Development (HUD) has previously addressed the issue of fee splitting with regard to housing counseling agencies . In the case of loan modification and foreclosure rescue services, NAR has received anecdotal evidence that some of these organizations have offered to pay referral fees to real estate agents in return for agents steering their clients to their foreclosure rescue services. In a reverse situation, at least one foreclosure rescue company has offered, under certain circumstances, to refer their clients to real estate agents in return for a split of the real estate agent's commission. In a February 12, 2009 email, HUD warned HUD-approved housing counseling agencies not to split fees with real estate brokers or real estate agents for purposes of paying for a client's foreclosure counseling session in relation to short sales. HUD ordered all approved housing counseling agencies, their affiliates and branches to stop the practice immediately and warned that future fee-splitting may be grounds for termination from the HUD program. In the same email, HUD warned that such practices may also violate the Real Estate Settlement Procedures Act (RESPA) which prohibits referral fees and kickbacks, from any person for any settlement service. NAR believes that a similar prohibition against fee splitting for referrals should extend to all loan modification and foreclosure rescue services, and any compensation to other service providers should be limited to bone fide services actually provided. Such a prohibition would be consistent with HUD's current Housing Counseling Program rules prohibiting referral fees and fee splitting as well as new guidance (referenced above) HUD has provided to its counseling agencies in short sale situations. Other NAR Concerns NAR has long been interested in promoting foreclosure prevention programs and has recently testified before Congress at a hearing on this subject NAR's testimony is attached to this comment letter. We appreciate the opportunity to address issues of concern to NAR in this comment letter. Sincerely, Charles McMillan, CIPS, GRI 2009 President, National Association of REALTORS