Licensing requirements for affiliated business arrangements in Colorado will increase and nearly 200 such arrangements will be shut down if a state official has her way, an industry trade group reported today.
“We need to do the right thing,” Erin Toll, Colorado’s deputy insurance commissioner, said on the last day of the Real Estate Services Providers Council‘s annual conference in Washington, D.C., according to RESPRO.
“The days when no one is enforcing rules are gone. We need greater teeth. Regulators need to step up,” Toll told 300 attendees at the conference, according to RESPRO.
Toll said there is nothing wrong with affiliated businesses that operate properly, but she is seeking legislation in Colorado to increase licensing requirements and stop “sham” affiliated businesses that she hopes will be a model for other states, the trade group reported.
The conference featured workshops on the subject, including a workshop on the state regulatory environment for affiliated businesses given by Bob Jaworski of Reed Smith LLP in Princeton, N.J. attended by more than 100 people, according to RESPRO.
In a typical affiliated business arrangement, a real estate brokerage sets up a joint venture with a mortgage lender or title insurer, for example. The partnership typically provides an in-house, one-stop shopping experience for the home buyer or seller, offering brokerage, lending and even closing services under one roof.
Affiliated business arrangements among real estate service providers are legal under the Real Estate Settlement Procedures Act, known as RESPA, as long as certain guidelines are followed and companies disclose their relationship to consumers.
However, these arrangements came under scrutiny in 2005 when Toll, in her official capacity with Colorado’s Insurance Division, investigated nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of investigations nationwide, in Florida, Washington, Hawaii, California, Oklahoma, Minnesota and Washington and other states.
RESPRO is a trade group focusing on affiliated business arrangements. Presentations at the conference focused on ways to effectively and legally conduct such arrangements.