Last week, the U.S. Department of Housing and Urban Development (HUD) postponed a dual agency ban on FHA short sales and deeds-in-lieu of foreclosure transactions, according to Realtor Mag. You may remember reading about this ban back in July, when HUD issued a letter to mortgage servicers making clear that dual agency transactions wouldn’t be allowed on any pre-foreclosure transactions as of October 1, 2013. What does that mean, exactly? In short, the ban would effectively “prevent real estate professionals from representing both buyers and sellers” in these transactions.
As you might imagine, the National Association of Realtors (NAR) was up in arms over the potential ban. Indeed, the NAR lobbied vehemently against the HUD policy. As such, it looks like the NAR may be claiming a victory here, as HUD indicated last week that “it would be reissuing its July guidance to servicers” and would also “be removing the dual agency language” from that guidance.
As the real estate market continues to rebound, many people across Illinois and the country will be thinking about purchasing short sale properties. How will the changes to the ban affect these potential homeowners? In short, a change to the guidance is likely to make the process easier for both the buyer and the seller, since real estate agents will be able to continue representing both parties in these transactions. If you have questions about buying a short sale or general questions about the housing market, don’t hesitate to contact an experienced real estate attorney today.
Timeline of the HUD Dual Agency Ban
According to DSNews.com, “the HUD prohibition had first been outlined in a July letter to mortgage servicers describing new anti-fraud requirements for short sales and deed-in-lieu of foreclosure transactions.” The new guidance, HUD emphasized, was intended to “prevent fraud and abuse in pre-foreclosure sales,” as the HUD Inspector General had observed conspicuous signs of fraud and abuse in many of these transactions.
The new guidance would have significantly limited the role of real estate professionals in pre-foreclosure sales. Naturally, the NAR objected to the HUD policy at the outset. Gary Thomas, the NAR President, drafted a letter to HUD that emphasized the organization’s reasons for opposing the policy. Thomas explained that HUD never provided any statistics or reports that depicted evidence of any short sale frauds or abuse by real estate agents. In his letter, Thomas stressed that “NAR takes fraud very seriously . . . . If there is evidence of fraud by our membership, we would like to be part of an effort to develop policies that effectively address these issues.”
The letter, according to DSNews.com, also emphasized that the new HUD policy would prevent real estate agents and brokers from effectively serving their clients. For instance, homeowners face a greater risk of foreclosure if they can’t find a real estate agent who has specialized knowledge about short sales to list their homes. Given that HUD has indicated that it won’t be enforcing this policy as of October 1, it looks like the NAR won the fight. However, not all consumer advocates are happy about HUD’s shift in position.
Does NAR Control HUD?
In an article released by Consumer Advocates in American Real Estate (CAARE), consumer advocates emphasized its concern about the influence NAR might have within HUD. The report drew up a timeline, explaining how HUD decided to lift its ban on dual agency after engaging in talks with the NAR.
We’ll have to wait and see if HUD continues to see fraud and abuse problems in pre-foreclosure transactions after electing to life the ban on dual agency. In the meantime, the experienced real estate lawyers at the Emerson Law Firm can answer your questions today. Don’t hesitate to contact us.
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