Mark-Up Amendment To RESPA §8(b) Introduced In House Of Representatives

May 7, 2002

On May 1, 2002, Rep. Tom Barrett (D. WI.) introduced legislation (H.R. 4627, the "Real Estate Settlement Fairness Act") [pdf] that would amend RESPA §8(b) to prohibit "mark-ups" (or "upcharges," as they are sometimes called). The bill, which was co-sponsored by Reps. Rush (D. Ill.), Schakowsky (D. Ill.), and Gutierrez (D. Ill), has been referred to the House Committee on Financial Services.

All of the bill?s sponsors represent districts in states that are subject to the jurisdiction of the United States Court of Appeals for the Seventh Judicial Circuit. In July 2001 the Seventh Circuit ruled in Echevarria v. Chicago Title & Trust Co., 256 F.3d 623, that mark-ups did not violate RESPA § 8(b). Three months later, HUD issued Policy Statement 2001-1 in which it made clear its position that § 8(b), which prohibits persons from giving and receiving any portion, split or percentage of a settlement charge other than for services rendered, prohibits mark-ups. The United States Court of Appeals for the Fourth Circuit currently has under review a mark-up case (Boulware v. Crossland Mortgage) in which HUD has filed a friend-of-the court brief emphasizing the views it expressed in the 2001 Policy Statement. Oral argument in that case was held in early April.

H.R. 4627 would leave the existing language of § 8(b) in place and would add a new subsection to § 8(b) that would prohibit any person from making or receiving a charge for a settlement service "rendered by another person in an amount that exceeds the amount paid for such service to the person actually rendering such service." Unlike HUD?s interpretation of the current language of § 8(b), the new subsection would prohibit the mark-ing up of another provider?s charge even if the person retaining the mark-up provides services that might justify the amount of the mark-up.

The bill also directs HUD to pre.cribe final regulations to implement the amendment within 90 days of enactment.

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