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RESPA Home Warranty Clarification Act of 2011

Floor Speech

Location: Washington, DC


Mrs. BIGGERT. 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.


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