[Congressional Record Volume 158, Number 116 (Wednesday, August 1, 2012)]
[House]
[Pages H5612-H5613]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RESPA HOME WARRANTY CLARIFICATION ACT OF 2011
Mrs. BIGGERT. 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.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 2446
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``RESPA Home Warranty
Clarification Act of 2012''.
SEC. 2. TREATMENT OF HOMEOWNER WARRANTIES.
Section 8 of the Real Estate Settlement Procedures Act of
1974 (12 U.S.C. 2607) is amended by adding at the end the
following new subsection:
``(e) Homeowner Warranties.--
``(1) In general.--Nothing in this section, section 2, or
section 3 shall be deemed to include, or be deemed to have
included, homeowner warranties or similar residential service
contracts for the repair or replacement of home system
components or home appliances.
``(2) Notice by home warranty company.--Any person that
pays another person not employed by the person for selling,
advertising, marketing, or processing, or performing an
inspection in connection with, a homeowner warranty or
similar residential service contract for the repair or
replacement of home system components or home appliances
shall include the following statement, in boldface type that
is 10-point or larger, in any such warranty or contract
offered or sold as an incident to or as part of any
transaction involving the origination of a federally related
mortgage loan:
`` `NOTICE: THIS COMPANY MAY PAY PERSONS NOT EMPLOYED BY
THE COMPANY FOR SELLING, ADVERTISING, MARKETING, OR
PROCESSING, OR PERFORMING AN INSPECTION IN CONNECTION WITH, A
HOMEOWNER WARRANTY OR SIMILAR RESIDENTIAL SERVICE CONTRACT
FOR REPAIRING OR REPLACING HOME SYSTEM COMPONENTS OR HOME
APPLIANCES.'
``(3) Notice by real estate agent or broker.--Any person
who has contracted to receive payment from a provider of the
services described in paragraph (1) for recommending the
purchase of a home warranty or similar residential service
contract, and is not an employee of such provider, shall
provide the potential purchaser, upon first recommending the
purchase of a homeowner warranty or similar residential
service contract, a written notice containing the following
language in boldface type that is 10-point or larger (with
the bracketed matter being replaced with the information
described by such bracketed matter):
`` `NOTICE: THIS IS TO GIVE YOU NOTICE THAT [the provider
of the notice] HAS RECEIVED OR WILL RECEIVE COMPENSATION FROM
[the home warranty company] FOR [the residential service for
which the notice provider is being compensated]. YOU ARE NOT
REQUIRED TO PURCHASE A HOME WARRANTY OR A SIMILAR RESIDENTIAL
SERVICE CONTRACT AND IF YOU CHOOSE TO PURCHASE SUCH COVERAGE
YOU ARE FREE TO PURCHASE IT FROM ANOTHER PROVIDER'.''.
The SPEAKER pro tempore. Pursuant to the rule, the gentlewoman from
Illinois (Mrs. Biggert) and the gentleman from Georgia (Mr. David
Scott) each will control 20 minutes.
The Chair recognizes the gentlewoman from Illinois.
General Leave
Mrs. BIGGERT. 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.
The SPEAKER pro tempore. Is there objection to the request of the
gentlewoman from Illinois?
There was no objection.
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.
{time} 2010
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.
[[Page H5613]]
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. DAVID SCOTT of Georgia. 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.
Mrs. BIGGERT. Mr. Speaker, I have no further requests for time if the
gentleman is ready to close.
Mr. DAVID SCOTT of Georgia. 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.
Mrs. BIGGERT. Mr. Speaker, I encourage all of my colleagues to
support this bill, as amended, and I yield back the balance of my time.
Mr. HINOJOSA. 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.
The SPEAKER pro tempore. The question is on the motion offered by the
gentlewoman from Illinois (Mrs. Biggert) that the House suspend the
rules and pass the bill, H.R. 2446, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
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