NAR members recently received word that the U.S. Department of Housing & Urban Development would be implementing a new policy on Oct. 1, 2013, that would prevent dual agency agreements in FHA pre-foreclosure transactions.The National Association of REALTORS® immediately began talks with HUD officials on the proposed change. On Wednesday afternoon HUD officials reported to NAR that they would reissue the July Mortgagee Letter (#2013-23) and remove all dual agency language (Part Three of the PFS Participation Requirements). The result is that the dual agency policy will not be implemented on Oct. 1, allowing NAR to continue the dialogue with agency officials on a formal solution to the dual agency issue.HUD had proposed the policy change in response to fraud and abuse detected by the HUD Inspector General in the pre-foreclosure sales process.NAR, working with state and local association presidents, sent a letter to HUD highlighting the concerns about the policy and the disruptive effect its implementation would have on communities across the nation.
- Any PFS proposed by the mortgagor or his agent, and approved by the mortgagee, must be an arm’s length transaction between the mortgagor and“would-be” purchaser;
- HUD defines an “arm’s length” transaction as a PFS between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment. Also, no hidden terms or special understandings can exist between any of the parties (e.g., buyer, seller, appraiser, sales agent, closing agent, and mortgagee) involved in the transaction;
- No party that is a signatory on the sales contract, including addenda, can serve in more than one capacity. To meet the PFS Addendum requirements, brokers and their agents may only represent the buyer or the seller, but not both parties;
- The broker hired to sell the property may not share a business interest with the mortgagee (if a shared interest exists between appraiser and sales agent and is known to the mortgagee, it must be noted in the servicing file); and
- All doubts will be resolved in a manner to avoid a conflict of interest, the appearance of conflict, or self-dealing by any of the parties (e.g., a real estate agent shall never be permitted to claim a sales commission on the sale of his own property, or that of an immediate family member [spouse, sibling, parent, or child], under the PFS procedure).