Fake Morality

by Peter G. Miller
March 11th, 2008

Today’s headlines largely involve New York Governor Elliot Spitzer, a former fighting prosecutor and the scourge of Wall Street. If the allegations are to be believed, Spitzer was willing to spend $5,000 of his own money for an evening of fun and entertainment with a woman who provided such services.

Other than Mrs. Spitzer, why anyone should care about this matter is unknown. There are no accusations of wrongfully-taking public funds, misusing public facilities or granting government favors unfairly. Gov. Spitzer has not sent anyone’s children to war, demolished the budget, wrecked the economy or destroyed the job base.

When last anyone looked, no bridges had fallen down in New York state and no levees had failed. And, who knows, maybe if more elected officials spent $5,000 per night for entertainment the economy would improve….

Meanwhile, in Washington it’s being alleged that HUD broke the law and violated RESPA, the Real Estate Settlement and Procedures Act. Writing in today’s Realty Times, Bob Hunt reports that last November HUD was offering real estate brokers an extra $250 if the buyer of a HUD-home also financed with an FHA mortgage — a huge no-no under RESPA.

Here’s what HUD said on November 15, 2007:

“Beginning today, prospective homebuyers in Michigan and Ohio will also be offered unique incentives to purchase HUD-owned properties using financing insured by the FHA. The Department estimates 2,000 people in Michigan and Ohio will benefit from these options over the next 10 months.

“First, individuals will be able to purchase a HUD Home with a $100 downpayment when they utilize an FHA-insured mortgage. Second, homebuyers can obtain a $2,500 sales allowance at closing when they use FHA financing, or a $1,000 sales allowance using other financing types. This incentive can be put towards closing costs, to make home repairs, or to pay down the mortgage. The $1,000 allowance for non-FHA financing must be used to pay closing costs. Finally, real estate brokers can obtain a $500 bonus when borrowers utilize FHA financing and a $250 bonus if borrowers use other financing options. The incentives are available through September 30, 2008. [As of February 8, 2008, the FHA bonus program has been discontinued].” (Parenthesis theirs)

Who enforces RESPA? Why that would be HUD.

If HUD is going to pay $250 to anyone, how about the buyers of HUD homes? Wouldn’t that encourage the purchase of HUD properties? And wouldn’t such payments have the advantage of being lawful?

You’re not going to find the HUD story on the front page of any major newspaper. It only involves a federal department, money to real estate brokers and an effort to distort the marketplace. No hotels, women or rich guys are involved.

Hunt says the original reporting in this matter comes from attorney Howard Lax writing in RESPA News Monthly. I say congratulations to them both.

For the full story by Hunt, please go to Who Will Watch the RESPA Watchdog?.

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