[Congressional Record (Bound Edition), Volume 158 (2012), Part 9]
[House]
[Pages 13148-13149]
[From the U.S. 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.
  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.

[[Page 13149]]


  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.
  Mr. BACA. Mr. Speaker, I rise in support of H.R. 2446, the RESPA Home 
Warranty Clarification Act.
  This bill clarifies that the sale of home warranties cannot be 
considered a settlement service, and therefore cannot be governed under 
the Real Estate Settlement Procedures Act, or RESPA.
  Many individuals buying a home want to avoid the financial risk of 
having to pay for major repairs on major systems and appliances.
  To reduce that risk and to get the peace of mind that comes with 
knowing they can help guard against the cost of significant repairs, 
home buyers often purchase a home warranty.
  Many individuals selling a home find that providing a home warranty 
at their own cost can help facilitate a quicker sale at a higher price 
by reducing the risk of the unknown for potential buyers.
  It is important to note that the purchase of the product is 
completely optional, and is not made mandatory by any financial 
institution or government sponsored enterprise during the home-buying 
process.
  Recently, however, HUD erroneously issued an interpretive rule 
blocking real estate agents from receiving a modest fee when they 
recommend the product to their client upon the purchase of their new 
home.
  As such, if this rule is allowed to stand, realtors would have no 
incentive to inform their clients about this product.
  Consequently, first-time homebuyers, or low- and moderate income-
families may not be made aware of this option, instead being forced to 
pay full price for the replacement of their home's most expensive 
appliances.
  At a time when our economy is still struggling, we need to ensure 
that hard working American families are still allowed to gain access to 
financial products that they depend on.
  That is why I urge my colleagues to support H.R. 2446.
  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.

                          ____________________