HUD Ten Part Test Held Unconstitutional in Court of Appeals

U.S. Court of Appeals Issues Ruling in Carter: Shortly before everyone left for their Thanksgiving holiday, the United States Sixth Circuit Court of Appeals in Cincinnati, Ohio issued a decision in the closely-watched Carter v. Welles Bowen Title, et al., case. The Carter case centered on the issue of whether the 1996-2 HUD Policy Statement, otherwise known as the Ten Part Test, was unconstitutional because it was too vague to be enforced. The Ten Part Test was created as a policy statement by HUD to help its enforcement of RESPA’s prohibition against sham affiliated business arrangements. In other words, under RESPA, any controlled business arrangement must satisfy the basic requiremetns of disclosure, non-restricted consumer choice and investment tied to ownership interests in order to qualify as a valid entity. Anything else would not be considered a bona fide provider of settlement services. Carter sued an Ohio controlled business arrangement consisting of a real estate firm and title company which was co-owned through a holding company also co-owned by Chicago Title Insurance Company, a well-known title insurance underwriter. The main allegation for the Plaintiff in the case was that the title agency and its ownership structure was nothing more than a sham conduit for illegal referral payments in violation of RESPA Section 8 and the 1996-2 HUD Policy Statement. The case has had a long procedural history winding its way through to the Court of Appeals on two separate occasions. The most recent of which focused on a lower court ruling that the Ten Part Test was unconstitutional as it was void for vagueness and thereby unenforceable. This prior ruling...

NAILTA Issues Position Paper on HR 2425 MERS Bill

The National Association of Independent Land Title Agents (NAILTA) has issued a position paper on Congresswoman Marcy Kaptur’s HR 2425 which would again ask HUD to investigate the Mortgage Electronic Registry System (MERS) through a HUD study and limit the accessibility to MERS by governement sponsored enterprises such as Fannie Mae and Freddie Mac, which curiously, happen to be co-owners of the MERS product.  The new bill mirrors a prior bill — known as HR 6460 — that Kaptur introduced in 2010. NAILTA: Why Congress Should Examine HR 2425 and MERS...