[Federal Register Volume 61, Number 214 (Monday, November 4, 1996)]
[Rules and Regulations]
[Pages 56624-56625]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-28331]
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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
24 CFR Part 3500
[Docket No. FR-3638-F-08]
RIN 2502-AG26
Amendments to Regulation X, the Real Estate Settlement Procedures
Act: Withdrawal of Employer-Employee and Computer Loan Origination
Systems (CLOs) Exemptions; Notice of Time Schedule for Establishing
Effective Date of Rule
AGENCY: Office of the Assistant Secretary for Housing-Federal Housing
Commissioner, HUD.
ACTION: Notice of time schedule for establishing effective date of
rule.
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SUMMARY: The Department published a notice on October 4, 1996, delaying
until further notice the effective date of a final rule revising
Regulation X, which implements the Real Estate Settlement Procedures
Act of 1974 (RESPA), in light of recent legislation. The final rule was
initially published on June 7, 1996, and it was corrected and revised
on August 12, 1996. The October 4 notice announced that within 30 days,
the Department would provide further notice of a time schedule for
making effective the various provisions of the June 7, 1996 rule.
Today's notice provides that time schedule.
FOR FURTHER INFORMATION CONTACT: David Williamson, Director, Office of
Consumer and Regulatory Affairs, Room 9156, telephone (202) 708-6408;
or, for legal questions, Kenneth A. Markison, Assistant General Counsel
for GSE/RESPA, Grant E. Mitchell, Senior Attorney for RESPA, or Richard
S. Bennett, Attorney, Office of General Counsel, Room 9262, telephone
(202) 708-1550. (The telephone numbers are
[[Page 56625]]
not toll-free.) For hearing- and speech-impaired persons, these numbers
may be accessed via TTY (text telephone) by calling the Federal
Information Relay Service at 1-800-877-8339. The address for the above-
listed persons is: Department of Housing and Urban Development, 451
Seventh Street, SW, Washington, DC 20410.
SUPPLEMENTARY INFORMATION: In the final rule published on June 7, 1996
(61 FR 29238) entitled ``Amendments to Regulation X, the Real Estate
Settlement Procedures Act: Withdrawal of Employer-Employee and Computer
Loan Origination Systems (CLOs) Exemptions,'' the Department
established an effective date of 120 days from publication: October 7,
1996. Subsequently, on August 12, 1996 (61 FR 41944), the Department
revised a document associated with that rule--Appendix D, the
Controlled Business Arrangement (CBA) Disclosure Statement Format--in
order to clarify the directions for completing the format.
Section 2103 of the Economic Growth and Regulatory Paperwork
Reduction Act of 1996, which was signed by the President on September
30, 1996, as Title II of the Omnibus Consolidated Appropriations Act,
1997 (Pub. L. 104-208; approved September 30, 1996) (the Act), delays
the effective date of the amendment to Regulation X contained in the
June 7, 1996 final rule concerning payments to employees by their
employers. For instance, one provision of the June 7, 1996 rule would
have eliminated 24 CFR 3500.14(g)(1)(vii) of Regulation X, which
permits ``[a]n employer's payment to its own employees for any referral
activities.'' Section 2103 of the Act delays the effectiveness of this
provision of the June 7 rule. The Act also provides that the effective
date of the following provisions is delayed: (1) The exemption for
employer payments to managerial employees (Sec. 3500.14(g)(1)(viii) of
the June 7 rule); (2) The exemption for employer payments to employees
who do not perform settlement services in any transaction
(Sec. 3500.14(g)(1)(ix) of the June 7 rule); and (3) The provision
clarifying that ``[a] payment by an employer to its own bona fide
employee for generating business for that employer'' is permissible
(Sec. 3500.14(g)(1)(vii) of the June 7 rule). The Act also forbids the
Department from providing public notice of the effective date of these
provisions more than 180 days or less than 90 days before their
effective date.
Although not required by the legislation, the Department decided to
delay temporarily the effective date of the entire June 7 rule, as
corrected and revised on August 12, and to continue the prior
provisions relating to employer-employee payments (as in effect on May
1, 1996), as required by the Act. The Department published a notice in
the Federal Register informing the public of this delay on October 4,
1996 (61 FR 51782). The October 4 notice announced that the Department
would analyze the legislation and, within 30 days, publish a second
notice providing the public information on a time schedule for making
effective the various provisions of the June 7 rule, as revised August
12. Today's notice provides the Department's time schedule for those
actions.
Time Schedule
The Department will shortly publish a revised final rule that will
make effective those provisions of the June 7 final rule that the
Department has determined are unaffected by the delay provisions in
section 2103 of the Act. The Department intends to publish this rule
within 15 days of date of publication of this notice and to establish
an effective date of 60 days after the date of publication.
For the reasons explained in the preamble to the June 7 rule, the
upcoming final rule will withdraw the Computer Loan Origination (CLO)
exemption (24 CFR Sec. 3500.14(g)(1)(viii)) and CLO disclosure format
(Appendix F to part 3500). It will implement the controlled business
format, as published on August 12, 1996 (61 FR 41944), with a technical
revision discussed below.
The upcoming final rule will also make other technical revisions
and clarifications to Regulation X, including some designed to conform
the regulatory language to the language of the new legislation. For
example, the Department intends, in the upcoming final rule, to replace
references to ``controlled business arrangements'' with references to
``affiliated business arrangements'' or ``AfBAs,'' reflecting the
change in terminology effected by section 2103(c) of the Act. The
Department intends to make this change throughout the Regulation X
(part 3500) and its appendices, including Appendix D, which will be
renamed the ``Affiliated Business Arrangement Disclosure Statement
Format.''
In the upcoming final rule, the Department intends to acknowledge
section 2103(d) of the Act, which amends section 8(c)(4)(A) of RESPA to
provide special affiliated business arrangement disclosure procedures
for telemarketing and electronic media referrals, by adding a cross-
reference to this amended statutory provision. The Department intends
to undertake future rulemaking to provide guidance on this provision of
the new Act. The Department also intends to revise the regulations in
the future to reflect the amendments in section 2103(a) of the Act
simplifying the disclosure to applicants relating to assignment, sale,
or transfer of mortgage servicing.
Because of the legislation, the upcoming final rule will not
address the employer-employee issues addressed in the June 7 final
rule. Consistent with the Act, the Department is prohibited from
announcing at this time the effective date for the employer-employee
provisions of the June 7 rule. It is the Department's intent, however,
to move forward expeditiously to make rules on this subject effective
on or after the legally permissible date of July 31, 1997, as feasible
in accordance with law. The Department's plans include issuing a
proposed rule in the upcoming months to create an exemption to section
8's prohibition against referral fees for employer payments to bona
fide employees for referrals of settlement service business to a
settlement service provider in the same industry that has an affiliate
relationship with the employer or in which the employer has a direct or
beneficial ownership interest of more than 1 percent.
Further Guidance
The October 4 notice advised affected persons to comply with the
guidance contained in the three Statements of Policy published
simultaneously with the June 7, 1996 rule (61 FR 29255-29266), except
to the extent that the guidance in them interprets rule provisions that
are delayed from becoming effective. That advice remains in effect.
In addition, as indicated in the October 4 notice, to ease any
compliance burden on the industry, the Department's position is that,
until further notice, persons are free to use the revised disclosure
statement format published on August 12, 1996, if they so choose, or
they may continue to use the format which was in effect on May 1, 1996.
As indicated above, however, the Department's plan is that the upcoming
final rule will make effective the revised disclosure statement format
published on August 12, 1996.
Dated: October 30, 1996.
Stephanie A. Smith,
General Deputy Assistant Secretary for Housing-Federal Housing
Commissioner.
[FR Doc. 96-28331 Filed 11-1-96; 8:45 am]
BILLING CODE 4210-27-P
