HUD HELD A SERIES OF INDUSTRY roundtables over the summer on the mortgage rules under the Real Estate Settlement Procedures Act (RESPA).

RESPA became federal law in 1974 to provide consumers with advance disclosures of settlement charges and to prohibit kickbacks and excessive fees in the home buying process. RESPA specifically prohibits excessive closing fees.

HUD officials deny any connection between the agency's roundtables and the ongoing investigation of title insurance fraud in Colorado and California. The agency's actions, however, indicate that HUD believes reform is needed.

Brian Sullivan, a HUD spokesperson, says that the process homeowners endure to buy and refinance homes is very complicated and has been that way for 30 years. “It's time to bring the rules into the modern age,” he says.

Problems with title insurance and closing fees were first reported in BUILDER in a May 2005 story (“Kickbacks Probed,” page 41) that outlined the investigations in Colorado and California. At the time, it was reported that First American Title Insurance released the names of 16 home builders that allegedly received kickbacks in exchange for sending business to the title insurance company.

First American settled with Colorado, agreeing to return $24 million to consumers nationwide. Cases in Colorado against Fidelity National Financial and LandAmerica Financial Group had not been settled at press time. In California, the state Department of Insurance settled with the three large insurance groups for $37.8 million. This includes about $15 million from First American's settlement in Colorado.

All the negotiations revolve around financial settlements with the title companies. At press time, there were no formal legal actions against any home builders surrounding the title insurance issue.