[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