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Nope, not illegal. Real estate companies in this area have been fighting this for YEARS! Attornies in this area have been debating this for YEARS and yet, they still do it. And its not just Pulte. KB Homes, Drees, Lennar all tie their incentives and closing costs to using their attorney and their mortgage lender.
I speak from experience. I have fought with them many times.
Vicki
Closing costs, yes, Attorney, yes. Those are typically part of their actual contract. And sometimes they may make exceptions to those rules, but not usually. Imagine closing hundreds of homes with different attorneys all over the Triangle. And the closing costs they offer b/c they own the lending companies. BUT......they may tell you you can't get any other incentives without using their lender, but I'm pretty sure that violates specific lending laws. Now, it may depend on the amount of the incentive.
Centex said all incentives require their mortgage company and attorney. I asked if I got the incentives if I paid cash. The on-site rep said that it probably could be arranged.
There is a new RESPA proposal (http://portal.hud.gov/pls/portal/docs/PAGE/FHA/IMAGE_LIBRARY/RESPA%20PROPOSED%20RULE%20PUB%203-14-08.PDF - broken link)that was submitted in March to HUD that would no longer allow a builder to state that a lender was required in order to get an incentive.
HUD believes that some businesses have used the affiliated business
arrangement exception in section 8 of RESPA to steer consumers to
affiliated settlement service providers that may not provide the best
mortgage products or settlement services for those consumers. A number
of such complaints stem from builders, who are in a position to refer
settlement service business, that use incentives or penalties to steer
consumers to the builders' affiliated mortgage and title companies.
Consumers have frequently contacted HUD to express concerns and
register complaints about these practices, which usually fall into one
of two categories.
First, consumers complain that the cost to the builders of
incentives and discounts related to the homes themselves have been
built into the sales price of the homes, so that they are not true
incentives and discounts, but are penalties (i.e., higher sales prices)
that are imposed if the consumer chooses an unaffiliated settlement
service provider. Second, consumers complain that the rates and fees
charged by builders' affiliated settlement service providers are higher
than what would be charged by unaffiliated settlement service
providers. In both of these cases, consumers may be confused about the
value of the ``deal,'' and may forego shopping for lower rates and fees
offered by unaffiliated settlement service providers.
For example, HUD has recently received complaints such as:
A buyer was offered a $22,000 discount on the price of
a home for using the builder's affiliated lender, but the interest
rate offered by the lender was \1/2\ point higher than the market
rate, and the origination fee charged by the affiliated lender was
higher.
A buyer would be required to make a higher earnest
money deposit and would lose a $2,000 ``closing incentive'' if the
buyer did not use the builder's affiliated lender.
A builder promised a $3,000 incentive on the purchase
price and $6,000 toward closing costs if the buyer used the
builder's affiliated lender, which charged an interest rate that was
1 percent higher than the market rate and additional fees.
The effect of the change made by the proposed rule in the
definition of ``required use'' is not limited to builders and their
affiliated settlement service providers. Any businesses that are either
clearly affiliated because of their company structures, or that would
be deemed to be in an ``affiliated business arrangement'' under RESPA's
definitions of that term and the related term of ``associate,'' should
be aware of the change in the definition of ``required use'' in this
proposed rule. This change could affect the applicability of the
affiliated business requirements to those businesses.
Further, the definition applies to all sellers of property in RESPA
covered transactions, for purposes of the prohibitions in section 9 of
RESPA against requiring directly or indirectly that buyers purchase
title insurance from any particular title company.
HUD is requesting comments on whether the proposed change in the
definition of ``required use'' will better serve the purposes of RESPA
and whether further improvements could be made in the definition to
accomplish the intent of both the affiliated business exemption in
section 8 and the prohibition in section 9 on the required use of a
title company.
Last edited by autumngal; 05-26-2008 at 12:28 PM..
Thank you for all the responses. I will see if I can get the lawyers written comments and post them here for everyone to read.
I suppose working with Pulte to take advantage of the incentives and refinancing later isn't out of the question.
My mom built in Del Webb, closed on the home in May 2007. I represented her.
She was fully prepared to pay cash for the home (her original plan) but took advantage of the incentives associated with using Pulte Mortgage. She took a SMALL loan, got the credits at closing, and paid the loan off with the first payment coupon.
Her house was delivered ahead of schedule. She has had no problems with post-closing repairs.
From what I understand the 24 month clause was put in place early on when the sell-thru was so deep that they were selling into phases where site work was not yet complete (no roads/pipes/electric connecting to lots that were preselling). Plenty of the first group of homeowners contracted to purchase with the understanding that their home would take 12 to 18 months to deliver, so 24 months didn't represent an 18 month delay to them.
I'd be careful and protect myself, but my personal experience in that neighborhood was nothing but positive.
There is a new RESPA proposal (http://portal.hud.gov/pls/portal/docs/PAGE/FHA/IMAGE_LIBRARY/RESPA%20PROPOSED%20RULE%20PUB%203-14-08.PDF - broken link)that was submitted in March to HUD that would no longer allow a builder to state that a lender was required in order to get an incentive.
HUD believes that some businesses have used the affiliated business
arrangement exception in section 8 of RESPA to steer consumers to
affiliated settlement service providers that may not provide the best
mortgage products or settlement services for those consumers. A number
of such complaints stem from builders, who are in a position to refer
settlement service business, that use incentives or penalties to steer
consumers to the builders' affiliated mortgage and title companies.
Consumers have frequently contacted HUD to express concerns and
register complaints about these practices, which usually fall into one
of two categories.
First, consumers complain that the cost to the builders of
incentives and discounts related to the homes themselves have been
built into the sales price of the homes, so that they are not true
incentives and discounts, but are penalties (i.e., higher sales prices)
that are imposed if the consumer chooses an unaffiliated settlement
service provider. Second, consumers complain that the rates and fees
charged by builders' affiliated settlement service providers are higher
than what would be charged by unaffiliated settlement service
providers. In both of these cases, consumers may be confused about the
value of the ``deal,'' and may forego shopping for lower rates and fees
offered by unaffiliated settlement service providers.
For example, HUD has recently received complaints such as:
A buyer was offered a $22,000 discount on the price of
a home for using the builder's affiliated lender, but the interest
rate offered by the lender was \1/2\ point higher than the market
rate, and the origination fee charged by the affiliated lender was
higher.
A buyer would be required to make a higher earnest
money deposit and would lose a $2,000 ``closing incentive'' if the
buyer did not use the builder's affiliated lender.
A builder promised a $3,000 incentive on the purchase
price and $6,000 toward closing costs if the buyer used the
builder's affiliated lender, which charged an interest rate that was
1 percent higher than the market rate and additional fees.
The effect of the change made by the proposed rule in the
definition of ``required use'' is not limited to builders and their
affiliated settlement service providers. Any businesses that are either
clearly affiliated because of their company structures, or that would
be deemed to be in an ``affiliated business arrangement'' under RESPA's
definitions of that term and the related term of ``associate,'' should
be aware of the change in the definition of ``required use'' in this
proposed rule. This change could affect the applicability of the
affiliated business requirements to those businesses.
Further, the definition applies to all sellers of property in RESPA
covered transactions, for purposes of the prohibitions in section 9 of
RESPA against requiring directly or indirectly that buyers purchase
title insurance from any particular title company.
HUD is requesting comments on whether the proposed change in the
definition of ``required use'' will better serve the purposes of RESPA
and whether further improvements could be made in the definition to
accomplish the intent of both the affiliated business exemption in
section 8 and the prohibition in section 9 on the required use of a
title company.
There is a delay in getting this approved. It is coming, though!
Vicki
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RESPA Proposal
