22822 Federal Register / Vol. 74, No. 93 / Friday, May 15, 2009 / Rules and Regulations 

approved as a generic copy of ScheringPlough Animal Health Corp.’s 

GENTOCIN Topical Spray, approved 

under NADA 132–338. The ANADA is 

approved as of April 7, 2009, and the 

regulations are amended in 21 CFR 

524.1044f to reflect the approval. 

In addition, American 

Pharmaceuticals and Cosmetics, Inc., is 

not currently listed in the animal drug 

regulations as a sponsor of an approved 

application. Accordingly, 21 CFR 

510.600(c) is being amended to add 

entries for this sponsor. 

In accordance with the freedom of 

information provisions of 21 CFR part 

20 and 21 CFR 514.11(e)(2)(ii), a 

summary of safety and effectiveness 

data and information submitted to 

support approval of this application 

may be seen in the Division of Dockets 

Management (HFA–305), Food and Drug 

Administration, 5630 Fishers Lane, rm. 

1061, Rockville, MD 20852, between 9 

a.m. and 4 p.m., Monday through 

Friday. 

The agency has determined under 21 

CFR 25.33(a)(1) that this action is of a 

type that does not individually or 

cumulatively have a significant effect on 

the human environment. Therefore, 

neither an environmental assessment 

nor an environmental impact statement 

is required. 

This rule does not meet the definition 

of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because 

it is a rule of ‘‘particular applicability.’’ 

Therefore, it is not subject to the 

congressional review requirements in 5 

U.S.C. 801–808. 

List of Subjects 

21 CFR Part 510 

Administrative practice and 

procedure, Animal drugs, Labeling, 

Reporting and recordkeeping 

requirements. 

21 CFR Part 524 

Animal drugs. 

■ Therefore, under the Federal Food, 

Drug, and Cosmetic Act and under 

authority delegated to the Commissioner 

of Food and Drugs and redelegated to 

the Center for Veterinary Medicine, 21 

CFR parts 510 and 524 are amended as 

follows: 

PART 510—NEW ANIMAL DRUGS 

■ 1. The authority citation for 21 CFR 

part 510 continues to read as follows: 

Authority: 21 U.S.C. 321, 331, 351, 352, 

353, 360b, 371, 379e. 

■ 2. In § 510.600, in the table in 

paragraph (c)(1), alphabetically add an 

entry for ‘‘American Pharmaceuticals 

and Cosmetics, Inc.’’; and in the table in 

paragraph (c)(2), numerically add an 

entry for ‘‘065531’’ to read as follows: 

§ 510.600 Names, addresses, and drug 

labeler codes of sponsors of approved 

applications. 

* * * * * 

(c) * * * 

(1) * * * 

Firm name and address Drug labeler 

code 

* * * * * 

American Pharmaceuticals 

and Cosmetics, Inc., 

1401 Joel East Rd., Fort 

Worth, TX 76140 

065531 

* * * * * 

(2) * * * 

Drug labeler 

code Firm name and address 

* * * * * 

065531 American Pharmaceuticals 

and Cosmetics, Inc., 

1401 Joel East Rd., Fort 

Worth, TX 76140 

* * * * * 

PART 524—OPHTHALMIC AND 

TOPICAL DOSAGE FORM NEW 

ANIMAL DRUGS 

■ 3. The authority citation for 21 CFR 

part 524 continues to read as follows: 

Authority: 21 U.S.C. 360b. 

§ 524.1044f [Amended] 

■ 4. In § 524.1044f, in paragraph (b), 

remove ‘‘and 058829’’ and in its place 

add ‘‘058829, and 065531’’. 

Dated: May 8, 2009. 

William T. Flynn, 

Acting Director, Center for Veterinary 

Medicine. 

[FR Doc. E9–11368 Filed 5–14–09; 8:45 am] 

BILLING CODE 4160–01–S 

DEPARTMENT OF HOUSING AND 

URBAN DEVELOPMENT 

24 CFR Part 3500 

[Docket No. FR–5180–F–06] 

RIN 2502–AI61 

Real Estate Settlement Procedures Act 

(RESPA): Rule To Simplify and 

Improve the Process of Obtaining 

Mortgages and Reduce Consumer 

Settlement Costs; Withdrawal of 

Revised Definition of ‘‘Required Use’’ 

AGENCY: Office of the Assistant 

Secretary for Housing—Federal Housing 

Commissioner, HUD. 

ACTION: Final rule. 

SUMMARY: This final rule withdraws the 

revisions to the definition of ‘‘required 

use’’ as provided in HUD’s November 

17, 2008, final rule amending its Real 

Estate Settlement Procedures Act 

(RESPA) regulations. The November 17, 

2008, final rule, in part, revised the 

existing definition of ‘‘required use,’’ for 

the purpose of enhancing protections for 

consumers from deceptive mortgage 

practices that result from certain 

affiliated business transactions. The 

revised definition of ‘‘required use’’ had 

been scheduled to become effective on 

January 16, 2009. On January 15, 2009, 

and March 10, 2009, HUD published 

final rules delaying the effective date of 

the definition of ‘‘required use.’’ The 

March 10, 2009, final rule provides for 

an effective date of July 16, 2009. The 

March 10, 2009, rule also solicited 

comment on whether HUD should 

withdraw the revised definition of 

‘‘required use’’ and, if so, whether HUD 

should initiate new rulemaking on the 

subject. HUD has taken into 

consideration the public comments 

received and has decided to withdraw 

the revised ‘‘required use’’ definition. 

HUD therefore leaves in place the 

definition of ‘‘required use’’ before the 

revisions made by the November 17, 

2008, final rule. HUD remains 

committed to the RESPA reform goals of 

the November 17, 2008, final rule and 

concerned about some of the practices 

reported by commenters, and will 

initiate a new rulemaking process on 

required use. 

DATES: Effective Date: June 15, 2009, 

except the amendment to 24 CFR 

3500.2, which is effective July 16, 2009. 

FOR FURTHER INFORMATION CONTACT: Ivy 

Jackson, Director, or Barton Shapiro, 

Deputy Director, Office of RESPA and 

Interstate Land Sales, Office of Housing, 

Department of Housing and Urban 

Development, 451 7th Street, SW., 

Room 9158, Washington, DC 20410– 

8000; telephone 202–708–0502 (this is 

not a toll-free telephone number). 

Persons with hearing or speech 

impairments may access this number 

through TTY by calling the toll-free 

Federal Information Relay Service at 

800–877–8339. 

SUPPLEMENTARY INFORMATION: 

I. Background 

On November 17, 2008 (73 FR 68204), 

HUD published a final rule amending its 

regulations in 24 CFR part 3500 to 

further the purposes of the Real Estate 

Settlement Procedures Act of 1974 (12 

U.S.C. 2601–2617) by requiring more 

timely and effective disclosures related 

Federal Register / Vol. 74, No. 93 / Friday, May 15, 2009 / Rules and Regulations 22823 

1Note that the definition of ‘‘required use’’ in the 

November 17, 2008, final rule did not take effect on 

January 16, 2009, and has not taken effect. As a 

result, the definition of ‘‘required use’’ currently 

codified in HUD’s RESPA regulations at 24 CFR 

3500.2 has remained the applicable definition 

pending the revised definition’s effective date. With 

HUD’s withdrawal of the definition set forth in the 

November 17, 2008, final rule, the codified 

definition continues to be the applicable one. 

to mortgage settlement costs for 

federally related mortgage loans to 

consumers. The final rule followed 

publication of a March 14, 2008, 

proposed rule (73 FR 14030) and made 

changes in response to public comment 

and further consideration of certain 

issues by HUD. Additional information 

regarding the RESPA regulatory 

amendments, and specifically changes 

made by HUD subsequent to the 

proposed rule, is provided in the 

preamble to the November 17, 2008, 

final rule. 

The November 17, 2008, final rule 

became effective on January 16, 2009, 

but provided a longer transition period 

for the majority of the new 

requirements. Other provisions, 

however, were scheduled to become 

applicable on January 16, 2009. Among 

regulatory changes identified as being 

applicable upon the effective date of 

January 16, 2009, is the revised 

definition of the term ‘‘required use.’’ 

The revision of that definition became 

the subject of litigation, following 

issuance of the final rule. (See National 

Association of Home Builders, et al. v. 

Shaun Donovan, et al., Civ. Action No. 

08–CV–1324, United States District 

Court for the Eastern District of Virginia, 

Alexandria Division.) 

HUD issued a final rule on January 15, 

2009 (74 FR 2369) that deferred the 

effective date of the revised definition of 

‘‘required use’’ for an additional 90 days 

until April 16, 2009. On March 10, 2009 

(74 FR 10172), HUD published a final 

rule further delaying the applicability 

date of the revised definition of 

‘‘required use’’ until July 16, 2009. The 

effective and applicability dates of the 

remaining provisions of the November 

17, 2008, final rule were not affected by 

the January 15, 2009, and March 10, 

2009, final rules, and they are not 

affected by this final rule. 

During this time HUD reviewed the 

provisions on ‘‘required use’’ and, 

through the March 10, 2009, rule also 

solicited public comment on whether 

HUD should withdraw the definition, as 

promulgated in the November 17, 2008, 

final rule, for the purpose of further 

evaluating the scope and operation of 

the required use provision, and on 

initiating new rulemaking. 

II. This Final Rule—Withdrawal of the 

Definition of ‘‘Required Use’’ 

This final rule withdraws the 

revisions to the definition of ‘‘required 

use’’ made by HUD’s November 17, 

2008, final rule, and leaves in place the 

definition codified in the RESPA 

regulations at 24 CFR 3500.2 prior to 

that revision.1 HUD remains committed 

to the goals of RESPA reform and 

concerned about affiliated business 

practices that interfere with consumer 

choice. Therefore, HUD will initiate 

new rulemaking to address RESPA’s 

prohibitions on required uses. 

The proposal to withdraw the 

‘‘required use’’ definition was of 

significant public interest. HUD 

received over 1,200 comments in 

response to the solicitation of public 

comments. The comments were highly 

informative and highlighted, among 

other things, the potential complexity of 

the affiliated business requirements and 

the need for further clarity on the 

application of ‘‘required use’’. The 

comments also underscored the need for 

HUD to continue to pursue reform in 

this area. 

Based upon HUD’s further evaluation 

of affiliated business arrangements, and 

HUD’s review of the comments, HUD 

determined that its revised definition of 

‘‘required use’’ did not strike the right 

balance between HUD’s goals of 

enhancing consumer protection 

consistent with the statutory scheme of 

RESPA and providing needed guidance 

to industry participants. Through this 

final rule, HUD is therefore withdrawing 

the revised definition of ‘‘required use,’’ 

and leaving in place the definition 

currently codified in 24 CFR 3500.2. It 

is HUD’s view that, especially given the 

attention focused on HUD’s concerns 

through this rulemaking, the prior 

definition of ‘‘required use’’ can be used 

to address some deceptive referral 

arrangements, even though it does not 

achieve the enhanced consumer 

protections that HUD sought with 

respect to mortgages involving affiliated 

business arrangements. HUD will 

continue to seek consumer protections, 

especially as mortgage products 

continue to change, often becoming 

more complex and challenging buyers’ 

understanding of the costs and nature of 

mortgage transactions. HUD is not 

abandoning its goal of providing greater 

protections to consumers in real estate 

settlement transactions, but remains 

open to different means of achieving 

this goal. 

New rulemaking offers HUD the 

opportunity to present a new proposal 

based upon its reevaluation of the 

required use provision in the affiliated 

business contexts, including the 

development of analysis in support of a 

new proposal, as well as applied in its 

various contexts in the RESPA 

regulations, and as further informed by 

the public comments received on the 

March 10, 2009, rule. New rulemaking 

will allow HUD to further refine its 

regulations on practices that are 

prohibited under other RESPA 

provisions. At the same time, HUD 

believes better success will be achieved 

by providing consumers, industry, and 

other interested members of the public 

the further opportunity for input into 

this area of RESPA reform. 

III. Discussion of the Public Comments 

Received on the March 10, 2009, Final 

Rule 

The public comment period on the 

March 10, 2009, rule closed on April 9, 

2009. HUD received over 1,200 

comments on withdrawal of the revised 

definition of ‘‘required use’’. Comments 

were submitted by mortgage servicers, 

homebuilding companies, builderaffiliated mortgage and settlement 

service providers, real estate and 

mortgage professional associations, and 

consumers. Many of the comments were 

form letters from members of industry 

organizations, with multiple 

commenters registering nearly identical 

comments and concerns. 

The March 10, 2009, rule sought 

comments on the withdrawal or nonwithdrawal of the revised definition of 

‘‘required use’’. Some comments 

submitted in response to the March 19, 

2009, final rule addressed other aspects 

of RESPA, however; for example, 

suggesting other changes to HUD’s 

RESPA regulations or disclosure forms. 

Comments submitted on other aspects of 

the November 17, 2008, final rule, or 

RESPA reform, are outside the scope of 

the March 10, 2009, rulemaking and are 

not addressed in this final rule. 

The summary of comments that 

follows presents the major issues and 

questions raised by the public 

commenters on the withdrawal of the 

revised definition of ‘‘required use’’. 

The summary is organized in two 

sections. The first section summarizes 

the comments opposed to withdrawal of 

the required use revision, and the 

second section summarizes those 

comments supporting withdrawal. Due 

to the similarity and overlap of the 

issues raised by commenters, HUD has 

provided a consolidated response at the 

end of the description of the public 

comments. 

22824 Federal Register / Vol. 74, No. 93 / Friday, May 15, 2009 / Rules and Regulations 

A. Comments Opposed to Withdrawal of 

Required Use Definition 

Comment: Revised ‘‘required use’’ 

provision is needed to promote 

competition. Of those commenters 

opposing withdrawal, the overwhelming 

basis cited is the absence of needed 

competition that would result if the 

revised definition of ‘‘required use’’ 

were withdrawn. The commenters wrote 

that homebuilders have established a 

system that restricts buyers to the use of 

mortgage lenders owned by or affiliated 

with the builders, thereby eliminating 

the choices available to consumers. 

Commenters stated that this practice of 

linking incentives to the use of certain 

lenders discourages consumers from 

shopping for service providers and, 

since closing is some time in the future, 

the buyer cannot determine at the time 

of application whether the interest rate 

of the mortgage offered in exchange for 

the incentive will be competitive. 

Commenters stated that the cost of 

giving up the incentives agreed to at the 

time of application may be too great for 

a buyer to bear even though the loan 

rate at the time it is locked turns out to 

be unfavorable. Commenters wrote that 

often buyers do not have sufficient 

knowledge to select an appropriate 

lender and are at the mercy of the 

builder; that buyers are not skilled 

enough in real estate transactions to 

realize they are being taken advantage 

of. 

The commenters wrote that the 

revised definition of ‘‘required use’’ in 

the November 17, 2008, final rule would 

preclude these practices and promote 

competition beneficial to homebuyers. 

The commenters wrote that while, on 

their face, the incentives are worth 

many thousands of dollars, they are 

actually priced into the cost of the home 

and permit the lender to charge higher 

rates or fees. The commenters stated 

that often the incentives are recouped in 

the home sales price or the loan rate 

without disclosing it to the consumer, 

with the result that consumers have 

been overpaying for homes and 

mortgages without realizing it. The 

commenters stated that the rates offered 

by the builder-affiliated lender are 

typically significantly higher than what 

the borrower would obtain from free 

market shopping. 

The commenters opposing 

withdrawal wrote that if builderaffiliated lenders were really offering 

competitive terms, they would not need 

to offer incentives that ‘‘force’’ the client 

to the affiliated lender. The commenters 

also wrote that the purpose of RESPA is 

to protect the public and allow them to 

shop for the best services and prices. 

The commenters stated that a delay in 

implementation of the required use 

provision would defeat this statutory 

purpose. 

Comment: The revised ‘‘required use’’ 

definition is needed to prevent conflict 

of interest and similar abuses. Several 

commenters wrote that allowing 

required services in exchange for 

incentives not only excludes 

competition, but results in borrowers 

signing with certain lenders, even 

though other lenders offer lower rates, 

which is a practice that is unethical, 

‘‘collusion,’’ ‘‘anti-competitive,’’ and 

ripe for abuse and fraud. The 

commenters wrote that it is a conflict of 

interest to have a builder-owned 

mortgage company financing the 

builders’ own homes, and for an 

incentive offered by a builder to require 

a borrower to use a certain lender. The 

commenters stated that often the builder 

is not actually providing the consumer 

with a discount because the cost of the 

incentives is buried in the loan rate or 

the cost of the home. The commenters 

wrote that the unethical features of this 

arrangement are underscored by the fact 

that the builder does not disclose to the 

buyer until closing that the use of a 

specific, higher-rate lender is required. 

The commenters stated that the 

disclosure is sometimes buried in 

unclear contract language. The 

commenters stated that this practice has 

resulted in borrowers getting loans with 

higher rates, resulting in greater 

numbers of foreclosures. 

Comment: The practice of linking 

builder incentives to the use of an 

affiliated mortgage company is unfair to 

other lenders. The commenters stated 

that even if buyers would prefer another 

lender, once they are presented with an 

incentive, they feel they must use the 

builder’s ‘‘joint venture’’ lender or the 

incentive will be withdrawn. Several 

lenders commented that they often lose 

business to other lenders because of 

these incentives. Commenters stated 

that the tradeoff is unfair both to buyers 

because of the higher loan costs and to 

lenders who cannot compete with the 

builder’s arrangement. Another 

commenter wrote that builder-affiliated 

lenders typically employ marginal loan 

officers that are merely order-takers and 

do not possess the education, 

experience, or knowledge to 

competently evaluate a potential 

borrower’s financial situation, further 

jeopardizing the opportunity for 

consumers to choose a beneficial 

mortgage product. 

The commenters stated that buyers 

should be able to keep the incentives 

and also choose their lender. One 

commenter wrote that these incentives 

are an ‘‘injustice’’ and a ‘‘restraint of 

trade.’’ Other commenters stated that 

builders are in control of every aspect of 

the transaction and are using these 

incentives simply to make more money, 

without actually providing a benefit to 

consumers contrary to advertisement. 

Commenters urged HUD to make home 

buying a fair playing field for consumers 

and lenders, and force builders to follow 

the same rules that other parties to the 

real estate transaction must follow. 

B. Comments Supportive of Withdrawal 

of Revised Definition of ‘‘Required Use’’ 

Comment: The revised required use 

provision would destroy homebuilderaffiliate business model and 

corresponding builder forward 

commitments. Many commenters wrote 

that the required use provision would 

unnecessarily destroy the homebuilderaffiliate business model, driving many 

builder-affiliated lenders out of 

business. The commenters wrote that 

one of the incentives most frequently 

offered is the buying down of interest 

rates through the purchase of forward 

commitments. In exchange for a fee, the 

homebuilder buys down the interest 

rates in the commitments to present 

attractive financing to their customers. 

Because commitments are expensive 

and require that a significant number of 

the homebuilder’s customers use the 

lender, homebuilders limit the 

companies they purchase commitments 

from to their affiliates. The commenters 

wrote that the revised required use 

provision would prohibit homebuilders 

from purchasing forward commitments 

from affiliates, but would not prohibit 

these arrangements with unaffiliated 

lenders. In consequence, the final rule 

would terminate the ability of builders 

to help consumers obtain competitively 

priced credit. 

In a similar vein, commenters stated 

that the revised required use provision 

would preclude homebuilders from 

offering other incentives to customers 

who use affiliated lenders—such as 

closing cost credits and home 

upgrades—unless homebuilders offer 

the incentives regardless of the 

settlement service provider. The 

commenters wrote that the joint 

business model depends on the ability 

to offer incentives to encourage the use 

of affiliates. According to the 

commenters, many affiliated lenders do 

not otherwise advertise or market their 

products to the general public. The 

commenters wrote that affiliated lenders 

who are not designed to compete on the 

open market would lose considerable 

business as a result of the revised 

required use provision. 

Federal Register / Vol. 74, No. 93 / Friday, May 15, 2009 / Rules and Regulations 22825 

Comment: The revised definition of 

‘‘required use’’ creates an unintended 

loophole that decreases rather than 

increases consumer protections. Some 

commenters stated that the revised 

definition of ‘‘required use’’ is worded 

in a confusing way that provides 

builders with a ‘‘loophole’’ that would 

decrease, rather than increase, consumer 

protections and competition. This 

loophole, according to a commenter, 

allows builders to set up their own 

mortgage company and offer incentives 

through that company, and thereby 

escape the oversight and protections 

sought by HUD’s revised definition of 

‘‘required use.’’ Commenters wrote that 

a definition of ‘‘required use’’ should 

clearly state that borrowers are allowed 

to shop for settlement services free of 

any influence from the builder and that 

incentives should be offered regardless 

of the customer’s choice for mortgage or 

title services. 

Other commenters wrote that HUD 

failed to analyze the potential impact of 

the new definition of ‘‘required use’’ 

and that the revised definition 

engenders a more confusing, less 

transparent loan origination process that 

will discourage consumer free choice. 

Commenters urged HUD to draft a more 

narrowly focused definition that would 

not prohibit builders, real estate brokers 

and others from offering genuine 

incentives to customers. The 

commenters stated their support for 

withdrawal of the revised definition of 

‘‘required use’’ but also stated their 

support for HUD to continue to pursue 

reform in this area. 

Comment: The revised definition of 

‘‘required use’’ lacks the necessary 

foundational support for the change to 

the definition of ‘‘required use’’. Some 

commenters wrote that the revised 

definition of ‘‘required use’’ is based 

solely on anecdotal evidence, and not 

supportable data. The commenters 

disagreed with HUD’s statements that 

homebuilder-affiliated lenders may not 

offer the best products and services, that 

their fees may be higher than their 

competitors, and that the transactions 

are too complicated for borrowers to 

calculate the value of the package deal 

they receive when using an affiliated 

lender. The commenters wrote that the 

justifications offered by HUD were 

‘‘incomplete, confusing, inaccurate, 

and/or based upon flawed reasoning or 

suspect evidence.’’ 

Definition of ‘‘required’’ is contrary to 

the term’s plain meaning under RESPA. 

Some commenters wrote that the 

revised definition of ‘‘required use’’ is 

contrary to the plain meaning of the 

words in the RESPA statute itself 

because defining ‘‘required use’’ to 

mean any incentive offered to a buyer to 

use an affiliated company contradicts 

the unambiguous meaning of the 

statutory term ‘‘required.’’ The 

commenters wrote that HUD should not 

confuse legitimate incentive 

arrangements with undue influence of 

required use of a product or service. The 

commenters also wrote that the required 

use provision contradicts the mandate 

of Section 8(c) of RESPA that the only 

criteria that may be imposed on 

affiliated business arrangements are 

those contained in the statute. 

The revised definition of ‘‘required 

use’’ is beyond the scope of HUD’s 

authority. Some commenters wrote that 

HUD should withdraw the definition of 

‘‘required use’’ because the revised 

definition is beyond the scope of HUD’s 

authority under RESPA. The 

commenters wrote that RESPA prohibits 

agency restrictions on affiliated business 

associations except those contained in 

the statute itself. The commenters wrote 

that HUD’s rulemaking authority 

extends only to interpret RESPA, to 

implement the statute, and to grant 

exemptions that broaden the 

permissibility of certain behavior. 

According to the commenters, Congress 

did not give HUD the power to prescribe 

additional restrictions, which HUD did 

in its revision to the definition of 

‘‘required use,’’ and therefore the 

revised definition is invalid. The 

commenters wrote that RESPA prohibits 

any limitation on affiliated business 

association other than requiring that a 

proper disclosure is given, the person is 

not required to use a particular 

settlement service provider, and nothing 

of value is received other than payments 

permitted under RESPA. The 

commenters wrote that RESPA 

demonstrates that Congress intended to 

favor affiliated business arrangements in 

nearly every manifestation. 

Comment: Revised required use 

provision unfairly targets homebuilders. 

Several commenters objected to the 

required use provision on the basis that 

it unfairly singles out homebuilders 

from all other entities involved in the 

sale and financing of real estate. The 

commenters wrote that the rule would 

not prohibit lenders from offering 

incentives to homebuyers who use an 

affiliated title company. Similarly, the 

commenters stated, real estate agents 

would be able to offer incentives to 

homebuyers that use the agent’s 

affiliated lender or title company. The 

commenters wrote that consumers 

should not be denied access to the 

legitimate incentives offered by builderaffiliated lenders because of a few 

unscrupulous lenders and builders. The 

commenters wrote that there is no 

rational basis to support the proposition 

that homebuilders should be treated 

differently from other entities. 

Comment: Builder affiliated lender 

model has efficiencies which are passed 

on to consumers. Commenters 

supporting withdrawal stated that 

affiliated lenders can assist and create 

efficiencies that result in discounts in a 

complex transaction that non-affiliated 

lenders cannot always handle in a 

timely manner because of their lack of 

experience with new home sales. These 

commenters emphasized the 

convenience of ‘‘one stop shopping’’ as 

a significant consumer benefit that will 

be eliminated unless HUD withdraws 

the revised definition of ‘‘required use.’’ 

The commenters wrote that rather than 

a consumer having to deal with multiple 

settlement service providers, affiliated 

providers coordinate the home purchase 

process by finding a loan which they 

underwrite and ensure that the funding 

will be ready at the closing date selected 

by the builder and buyer. The 

commenters wrote that consumers 

receive better service from affiliated 

lenders because of the efficiencies 

resulting from the relationship with the 

builder, the linked communication 

systems and standardized policies, and 

the lender’s own desire to obtain repeat 

business and recommendations. 

Because affiliated lenders work with 

high volumes of transactions, they have 

proven controls that ensure a complete, 

fast, and fair transaction. Affiliated 

lender commenters wrote that because 

of their affiliation, they have been able 

to help borrowers who have had 

problems with other lenders or who 

needed to close quickly. The 

commenters wrote that post-closing 

surveys show a customer satisfaction 

rate of 90 percent with affiliates. 

Comment: Affiliated companies help 

prevent mortgage fraud. Commenters 

wrote that when outside lenders are 

involved, the potential for mortgage 

fraud is greater than when consumers 

use affiliated companies because the 

outside lender’s personnel are often not 

as well trained as the personnel of 

affiliated lenders. Commenters stated 

that because of their lack of affiliation, 

outside lenders do not have as great a 

motivation to prevent fraud as do 

affiliated lenders. The commenters 

stated that in affiliated relationships, 

both entities can work together to 

prevent mortgage fraud. 

C. HUD Response to the Public 

Comments 

HUD appreciates all the comments 

submitted in response to the solicitation 

of comment in the March 10, 2009, rule, 

on the proposal to withdraw the revised 

22826 Federal Register / Vol. 74, No. 93 / Friday, May 15, 2009 / Rules and Regulations 

‘‘required use’’ definition in the 

November 17, 2008, final rule. HUD 

reviewed and gave careful consideration 

to all views expressed. Following 

consideration of the comments and 

HUD’s further evaluation of the 

definition and application of ‘‘required 

use’’ HUD has decided to withdraw the 

revised definition and, leave in place 

the definition of ‘‘required use’’ as 

found in HUD’s codified regulations in 

24 CFR 3500.2, and which has remained 

in effect since the revised definition of 

‘‘required use’’ in the November 17, 

2008, final rule, had not taken effect. 

HUD reiterates its commitment to fair 

real estate settlement practices that are 

not misleading, prevent abuse, offer 

proper disclosures to homebuyers, and 

promote choice and competition. HUD’s 

intent in revising the definition of 

‘‘required use’’ was to clarify its 

interpretation of RESPA’s requirements 

with respect to transactions involving 

affiliated businesses in order to promote 

more competition among settlement 

service providers. After further 

evaluation and consideration of the 

concerns voiced by consumers and 

industry participants from various fields 

about the application of the revised 

definition of ‘‘required use,’’ HUD has 

concluded that all would benefit by 

HUD withdrawing the revised definition 

and addressing ‘‘required use’’ through 

new rulemaking. 

HUD recognizes that the affiliations of 

businesses involved in complex home 

purchase transactions can themselves be 

complex arrangements, and that 

consumers may have difficulty 

understanding whether there is value in 

using affiliated businesses in mortgage 

transactions. HUD has determined that 

further development of the concept of 

‘‘required use’’ is necessary to assure 

that, especially in the affiliated business 

context, its application protects 

consumers by eliminating abusive 

practices that increase costs for 

unsuspecting consumers. The comments 

submitted in response to the March 10, 

2009, rule provide HUD with a good 

starting point for going forward on this 

issue. Consumers and industry and the 

public generally will have further 

opportunity to offer feedback when 

HUD issues a new proposed rule on this 

subject. 

Although HUD is withdrawing the 

revised definition of ‘‘required use,’’ a 

definition of ‘‘required use’’ remains 

part of HUD’s RESPA regulations. That 

definition, which focuses its discount 

language on settlement services, is the 

one that was in place in HUD’s RESPA 

regulations prior to HUD’s issuance of 

the November 17, 2008, final rule, and 

which has remained in place since the 

revised definition of ‘‘required use’’ 

never took effect. Additionally, although 

HUD is withdrawing the revised 

definition of ‘‘required use’’, the 

withdrawal should not be interpreted to 

signal any lessening of HUD oversight or 

enforcement of existing statutory and 

regulatory provisions in this area. HUD 

interprets its definition generally as 

aiming to distinguish the features of 

legitimate incentives and discounts 

offered to consumers from those that 

may result in undisclosed or higher 

costs to consumers. The public 

comments on this subject underscore 

the need for greater attention to and 

understanding of the treatment of 

discounts to consumers under RESPA 

and HUD’s RESPA regulations. 

With respect to the more specific 

issues expressed by commenters on the 

subject of ‘‘required use’’, HUD will 

defer further discussion of such issues 

to any new rulemaking. Generally, 

however, HUD notes that it revised the 

definition of ‘‘required use’’ to more 

effectively realize Congress’s intent in 

passing RESPA. RESPA’s principal goal 

is consumer protection. RESPA provides 

HUD with the requisite authority to 

promulgate a revised definition of 

‘‘required use’’ that meets the goals of 

RESPA and HUD’s mandate to enforce 

RESPA. Today’s final rule will enable 

HUD to reconsider all of the issues 

involved in the application of the 

required use concept and to better craft 

requirements and limitations that 

address the valid concerns raised in the 

preceding rulemaking. 

IV. Findings and Certifications 

Federalism Impact 

This rule does not have Federalism 

implications and does not impose 

substantial direct compliance costs on 

state and local governments or preempt 

State law within the meaning of 

Executive Order 13132 (entitled 

‘‘Federalism’’). 

Unfunded Mandates Reform Act 

Title II of the Unfunded Mandates 

Reform Act of 1995 (2 U.S.C. 1531– 

1538) (UMRA) requires Federal agencies 

to assess the effects of their regulatory 

actions on state, local, and tribal 

governments and on the private sector. 

This rule does not, within the meaning 

of the UMRA, impose any Federal 

mandates on any state, local, or tribal 

governments nor on the private sector. 

List of Subjects in 24 CFR Part 3500 

Consumer protection, Condominiums, 

Housing, Mortgagees, Mortgage 

servicing, Reporting and Recordkeeping 

requirements. 

■ Accordingly, 24 CFR part 3500 is 

amended as follows: 

PART 3500—REAL ESTATE 

SETTLEMENT PROCEDURES ACT 

■ 1. The authority citation for part 3500 

continues to read as follows: 

Authority: 12 U.S.C. 2601 et. seq: 42 

U.S.C. 3535(d). 

■ 2. Section 3500.1(b)(1) is revised to 

read as follows: 

§ 3500.1 Designation and applicability. 

* * * * * 

(b) * * * 

(1) Sections 3500.8(b), 3500.17, 

3500.21, 3500.22 and 3500.23, and 

Appendices E and MS–1 are applicable 

commencing January 16, 2009. 

* * * * * 

■ 3. Effective July 16, 2009, in § 3500.2, 

revise the definition of ‘‘Required use’’ 

to read as follows: 

§ 3500.2 Definitions. 

* * * * * 

Required use means a situation in 

which a person must use a particular 

provider of a settlement service in order 

to have access to some distinct service 

or property, and the person will pay for 

the settlement service of the particular 

provider or will pay a charge 

attributable, in whole or in part, to the 

settlement service. However, the 

offering of a package (or combination of 

settlement services) or the offering of 

discounts or rebates to consumers for 

the purchase of multiple settlement 

services does not constitute a required 

use. Any package or discount must be 

optional to the purchaser. The discount 

must be a true discount below the prices 

that are otherwise generally available, 

and must not be made up by higher 

costs elsewhere in the settlement 

process. 

* * * * * 

Dated: May 7, 2009. 

Ronald Y. Spraker, 

Acting General Deputy Assistant Secretary 

for Housing—Deputy Federal Housing 

Commissioner. 

[FR Doc. E9–11383 Filed 5–12–09; 4:15 pm] 

BILLING CODE 4210–67–P 

PENSION BENEFIT GUARANTY 

CORPORATION 

29 CFR Part 4022 

Benefits Payable in Terminated SingleEmployer Plans; Interest Assumptions 

for Valuing and Paying Benefits 

AGENCY: Pension Benefit Guaranty 

Corporation.