Standardized natural hazard disclosure statements will now be considered as part of regulated real estate settlement service
Property I.D. Corporation HUD Lawsuit Resolved
August 7, 2008 - Los Angeles, California - In a dramatic example of how the government and the real estate industry are working together to establish new practices for California home buyers and sellers, Property I.D. Corporation America's first leading provider of real estate natural hazard disclosure reports, today announced its settlement agreement with the U.S. Department Of Housing And Urban Development (HUD), which will now require that all Natural Hazard Disclosure Statements (NHDS) be considered and treated as real estate settlement services subject to the federal Real Estate Settlement Procedures Act (RESPA).
Prior to this settlement, the NHDS was not listed as a real estate settlement service subject to RESPA; the NHDS was not generally treated as a settlement cost to be paid through escrow; and transactions often closed without an NHD report. Notably, HUD did not require an NHDS or an NHD report for federal mortgage loan transactions (through Fannie Mae and Freddie Mac) in California. By this landmark settlement, Property I.D. and HUD have agreed that the NHDS and the NHD report industry will now be subject to HUD's regulation under RESPA. This should provide further protection for California home buyers and sellers because the previously unregulated hazard disclosure process will be treated as part of the regulated real estate settlement process.
Property I.D. Corporation defended the need for clear rules for the industry and for consumers, and this settlement agreement takes an important step in that direction. Because RESPA is a federal statute, HUD would have ordinarily been required to amend the statute through Congress to add the NHDS as a defined settlement service. The settlement agreement bypasses this process because Property I.D. Corp has voluntarily agreed to treat the NHDS and NHD reports as subject to RESPA. Given HUD's clearly articulated views on the applicability of RESPA, it is expected that other NHD report providers in California will follow Property I.D.'s lead. Property I.D. is the industry's largest provider of NHD reports.
"Property I.D.'s settlement with HUD presents the opportunity for an entire industry to redefine itself, its role, and its relationship with brokerages, agents and escrow officers," said Andrew Gilford, partner with Weston, Benshoof, Rochefort, Rubalcava and MacCuish, who represented Property I.D. through this process.
In the settlement agreement, Property I.D. Corporation makes clear that it is agreeing to resolve this matter without any requirement that it pay money or penalties to HUD and without any finding of liability or wrongdoing against it or the real estate brokerages affiliated with Property I.D., including the Cendant Corporation, NRT/Coldwell Banker Residential Brokerage Corporation, Prudential California Realty, and others.
No claims were ever made about the veracity of Property I.D.'s comprehensive and accurate disclosure reports which are considered without equal.
Consumers are the ultimate beneficiary of the settlement because the NHD report industry was previously unregulated, resulting in some substandard NHD reports. Property I.D. had long urged HUD to step in and make clear its intention to regulate the industry. This agreement does exactly that.
"Property I.D. Corporation welcomes this agreement with HUD. Other NHD report providers will now have to try to live up to the higher standard set by Property I.D.," added Gilford. The agreement also protects every NHDS company and their reports because payment will now be collected as part of escrow, which will require a significant change in every escrow company's standard procedures.
About Natural Hazard Disclosure
Since 1999, California has required disclosure of six natural hazards in one document. These include special flood hazard areas, flooding by dam failure, very high fire hazard severity zones, wild land fire areas, earthquake fault zones, and seismic hazard zones. Each natural hazard must be based on Federal and State government maps. California also legally requires several other governmentally mapped items that are not listed on the NHDS (industrial use zone, military ordnance zones, Mello-Roos, special tax assessment districts, airport vicinity, conservation commission jurisdictions). These hazards will always appear in a Property I.D. natural hazard disclosure report.
Only one disclosure report provider, Property I.D., provides all the Federal, State, and local disclosures in its comprehensive Natural Hazard Disclosure Report. Depending upon the location of the property, local disclosures may include naturally occurring asbestos, methane gas, subsidence, compressible soils, expansive soils, ground displacement, fault rupture zones, fire threat zones, local fire hazard zones, protected species and habitats, abandoned mining operations, local faults, local landslides, local liquefaction zones, among others.
About Property I.D.
Property I.D. is the largest natural and environmental hazard disclosure company in the country. By developing its own and the most complete and accurate Geographic Information Systems, Property I.D. is able to pinpoint the proximity of officially mapped Federal, State and local hazards to commercial and residential real property. Using smart and effective solutions to meet the ever-growing disclosure needs of its clients, Property I.D. provides the most comprehensive, accurate and best-insured disclosure report available anywhere. Property I.D.'s dedication to its reports and its clients has created a level of continued growth and innovation that remains unrivaled in its industry. Visit www.propertyid.com.
For more information, contact:
Bob Gold & Associates
Kevin Smith, a staff writer at Pasadena Star-News wrote and posted this article about the landmark agreement.