HUD putting the hammer down on the use of builder’s affiliated lenders

For years, US builders have offered customer incentives such as upgrades, discounts, closing costs, rebates, etc. with the stipulation that the customer uses the builder’s affiliated mortgage lender.  Kenneth Harney of The Washington Post wrote about this a few weeks ago, correctly stating that, “….in the real estate business, this is known as ‘required use’.  Under the Real Estate Procedures Act, consumers cannot be compelled to use the services of affiliates of realty firms, title companies, builders and other participants.”

Harney cites the example that a real estate broker cannot legally force you to buy or use a mortgage company that is one of its own affiliates.   Apparently, consumers have been complaining for years that they were being pushed into loans with higher rates, fees and closing costs.  If they raised a stink, supposedly builders said they could either go to close with the affiliated lender, or they could use their own lender but lose their discounts.

Harney goes on to write that the National Association of Home Builders is having a fit about it and filed a suit in federal court to block HUD’s action.  HUD withdrew its action but now wants “…a full public airing of the pros, cons and mechanics of builder rebate programs that are tied to affiliated loan deals. “


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