RESPA Home Warranty Clarification Act of 2012

Mr. Speaker, I move to suspend the rules and pass the bill (H.R. 2446) to clarify the treatment of homeowner warranties under current law, and for other purposes, as amended.

Mr. Speaker, I ask unanimous consent that all Members may have 5 legislative days in which to revise and extend their remarks and add extraneous material on this bill.

Mr. Speaker, I yield myself such time as I may consume.

I rise in support of H.R. 2446, the RESPA Home Warranty Clarification Act, and urge my colleagues to support the bill. H.R. 2446 is a bipartisan bill that Mr. Clay of Missouri and I introduced last year. The bill has 40 cosponsors, including 13 Democrats and 27 Republicans, and I thank the gentleman from Georgia (Mr. Scott) for managing this bill.

On March 27, the Financial Services Committee reported out the bill by voice vote. The RESPA Home Warranty Clarification Act would amend the Real Estate Settlement Procedures Act of 1974, or RESPA, to clarify that, as long as a consumer or borrower receives specific disclosures about it, a fee paid to a real estate broker or agent related to the sale of a home warranty is not a RESPA violation.

When Congress passed RESPA in 1974, it intended for the law to provide consumers or borrowers with timely disclosures related to the cost of real estate settlement services. Title insurance, a flood elevation certificate and homeowners insurance are a few examples of services required at a mortgage settlement. Unlike these settlement services, a home warranty is not a required service. For a borrower or a consumer, the purchase of a home warranty is optional. It is a service contract under which a home warranty company provides repair or replacement coverage for a home's system components and/or appliances. A real estate broker or agent typically acts as a representative for the home warranty company that offers the home warranty, and the real estate broker or agent receives a commission from the home warranty company for presenting the home warranty to the home buyer if the homeowner chooses to purchase the warranty.

Congress originally delegated RESPA rulemaking and enforcement authority to the U.S. Department of Housing and Urban Development, HUD. For nearly 20 years, from 1974 to 1992, HUD issued no rules or guidance related to the sale of a home warranty by a real estate broker or agent.

In 1992, HUD issued regulations adding homeowners warranties as a settlement service, but was silent on the matter until recent years. Citing evidence to demonstrate a problem with home warranty-related sale practices, commission arrangements, disclosures, or the product itself between 2008 and 2010, HUD issued an unofficial staff interpretive rule and the subsequent guidance. In short, after 34 years, with no apparent problem with a product that is not required for closing, HUD determined that, under RESPA, it is a violation for a real estate broker or an agent to be compensated by a home warranty company for offering a home warranty to a borrower in connection with the real estate transaction.

Mr. Speaker, HUD clearly is seeking to create a solution where there simply is no problem. HUD's unfounded interpretation doesn't follow the letter of the law as intended by Congress. According to witness testimony received by the Financial Services Subcommittee on Insurance, Housing and Community Opportunity, this misinterpretation of law has resulted in unnecessarily disrupting longstanding business practices that could increase the costs and decrease the availability of home warranties to consumers, as well as unintentionally harm small businesses. H.R. 2446 would clarify longstanding law and practice while restoring certainty related to home warranties in the real estate marketplace.

I'd like to thank my colleague, Mr. Clay, for working with me on this bill, and I'd like to thank the gentleman from Georgia for managing this bill. I'd also like to thank the bill's 40 bipartisan cosponsors from across the country.

I urge my colleagues to support H.R. 2446, and I reserve the balance of my time.

Mr. Speaker, I have no further requests for time if the gentleman is ready to close.

Mr. Speaker, I encourage all of my colleagues to support this bill, as amended, and I yield back the balance of my time.

Mr. Speaker, I yield myself such time as I may consume.

I rise today to encourage all of my colleagues to vote in favor of H.R. 2446, the RESPA Home Warranty Clarification Act.

Before I explain exactly why this legislation is so important and vital, let me first take a moment to thank my friend and colleague, and my fellow Financial Services Committee member and the sponsor of this legislation, Mrs. Biggert, for her hard work on this bill. The fact that this bill passed both subcommittee and full committee by voice vote is a testament to not only the issue's importance, but also to Mrs. Biggert's dedication and openness in alleviating Members' concerns.

Regarding the bill, itself, Mr. Speaker, this legislation will help small businesses. It will help real estate professionals. Most importantly, it will help homeowners by clarifying the law on the sale of home warranties.

Congress enacted legislation many years ago to outlaw kickbacks paid in connection with services that must be performed to close a federally-related mortgage loan. An interpretive rule released by the Department of Housing and Urban Development has, unfortunately, created uncertainty about application of the law to home warranties which are not necessary to close a loan to purchase a home. To eliminate confusion and reduce uncertainty, our bill makes clear that the term ``settlement services'' does not include home warranties.

This legislation also provides new notice requirements applicable to home service contract companies and to real estate professionals so that prospective purchasers of home warranties are aware that a payment may have been made in connection with the selling, advertising, marketing, processing, or performing an inspection in connection with the home warranty.

This simple clarification will allow members of the home warranty industry to pay modest sums to real estate professionals for direct marketing and related services in connection with the sale of a home warranty without a risk of running afoul of a law Congress never intended to be applicable for a completely optional product.

This is the simplification of this law that is very important. It's very simple, but it's very important so that our real estate industry and home mortgage industry can move more smoothly.

Please join me in voting for this commonsense legislation that will benefit consumers and the small businesses that repair and replace home systems covered by home warranties.

With that, Mr. Speaker, I reserve the balance of my time.

Likewise, I'm ready to close.

I just want to say in closing that, again, Mrs. Biggert has done a wonderful job on this, Mr. Speaker, and should be commended for it. This is a very important and simple piece of legislation, but it will help to iron out and smooth out confusion and allow for our real estate and our housing and our home mortgage industry to move more smoothly. I urge all of my colleagues to vote for it.

With that, I yield back the balance of my time.

Mr. Speaker, I rise today in support of H.R. 2446, ``The RESPA Home Warranty Clarification Act.'' The Real Estate Settlement Procedures Act of 1974, or RESPA, was crafted by Congress to only cover those services necessary for closing the transaction of buying a home. A recent interpretive rule issued by the Department of Housing and Urban Development broke this precedent by bringing home warranties under RESPA. This bipartisan act clarifies that home warranties fall outside the scope of RESPA because they are unnecessary for closing.

This bill was passed out of the Financial Services Committee on voice vote, and I am proud that the Committee also passed an amendment that I offered, which adds even more transparency to the bill.

This amended bill would require the real estate broker who recommends the purchase of a home warranty to a homebuyer to disclose that he or she may receive compensation for the recommendation; that the homebuyer is not required to purchase a home warranty contract; and that the homebuyer can purchase a home warranty contract from a provider not recommended by the real estate broker.

This is is essential information for the homebuyer to make an informed choice when deciding whether to purchase a home warranty and I am proud to have added this disclosure requirement to H.R. 2446. This bill makes clear that the term ``settlement service'' in RESPA does not include home warranties, something Congress never intended.