Use The Government To Fight Against Negligent Home Builders

(The home buying process appears to becoming a little safer as buyers have added protection by a governmental agency that makes sure illegal kickbacks and predatory schemes are withheld from a transaction between home builder and buyer.)

Home builders have encountered a few black eyes over the years as they have been suspected of pressuring buyers to use their lenders or buy their upgrades in return for a safe property. Kenneth R. Harney's article, "A Helping Hand In Builder Disputes," published November 18, 2006 in The Washington Post, explains how consumer's can feel a little safer when entering a home buying contract with a builder.

"When home builders behave badly, some of their customers may have an unexpected resource: The federal government's 'RESPA police,' who say they have become increasingly active in resolving consumer complaints through nonpublic interventions with builders."

The Real Estate Settlement Procedures Act (RESPA) is a law that protects consumers from home builders pressuring kickbacks and other settlement related abuses. In turn, the RESPA police are investigators that are employed at the Department of Housing and Urban Development (HUD).

RESPA police may be best known for their high profile settlement agreements either to real estate, title insurance and mortgage industry firms.

"But with no public fanfare, the RESPA police have begun intervening in complaints brought by individual consumers who say builders are unfairly forcing them to use their affiliated mortgage companies. The affiliates' loan deals, the complaints say, typically are more costly than those available from independent mortgage brokers and lenders."

"In one case outlined by HUD officials in an interview, a builder canceled a sales contract and seized an $11,845 good-faith deposit when a buyer refused to use the builder's affiliated mortgage company."

Under RESPA, home builders are restricted from demanding or even pressuring the consumer to use one of their affiliated companies. The builder is only allowed to offer the affiliated services out of convenience for the consumer.

"According to the HUD officials, after RESPA investigators contacted the builder and gave the company 15 days to resolve the dispute, the builder -- which the officials also declined to identify because no public action was taken -- not only allowed the buyer to proceed with independent financing, but also paid the buyer's lender to lower the interest rate."

It is now the buyer's responsibility to contact RESPA when similar situations occur. Of course the buyer will seek actions when something drastic as being charged an illegitimate $10,000 occurs but if there is any indicated pressure on consumers from builders, RESPA wants to be notified. This could open up an investigation that leads to previous incriminating conduct.

"In a case involving incentives dangled by many builders to attract buyers in soft markets, a prospect was offered a 'free' morning room addition to the new house. The builder said the addition was worth about $13,500. The only hitch was that the purchaser would need to use the builder's mortgage subsidiary. The builder assured the buyer that the rates, fees and terms offered by the subsidiary were 'very competitive' with outside lenders and brokers, according to the complaint."

Needless to say, upon further investigation, the subsidiary's fees were found to include a $5,400 origination fee!

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