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The Potential Perils of Being Out of Control

reconis perils out of controlThe American residential real estate industry is currently going through a quiet but particularly dramatic phase of its contemporary history. Brought about by the now almost two year old announcement by the Consumer Financial Protection Bureau that, effective August 1, 2015, it would be developing and enforcing a new set of lender mortgage disclosure and RESPA audit rules, the various segments of the industry are demonstrating a number of reactions and responses.

Over the past two years, the mortgage and title sectors invested significant energies and resources into creating processes and procedures that will ensure that its business practices will be in compliance with the new rules. Both deserve a hero's medal for the millions of dollars and human resources that they have invested into making sure that the return of regulation to the industry is accomplished with as little disruption as possible.

The fourth player in this historic drama, the real estate services or brokerage sector, has also executed on a number of significant reactions and responses. Instead of acknowledging the new rules and doing their best to comply, by and large, the brokerage sector has elected to effect a combination of ignoring the rules and denying any potential impact or liability.

In its defense, the brokerage sector was, to some extent, relying upon representations by its advisors in organized real estate that nothing in the Dodd Frank consumer protection act of 2010 applied to them. For much of period since July of 2013, brokerage sector inquires were met with an absolute assurance that there was a specific provision and a political promise that nothing in the CFPB program was relevant to brokerages and agents.

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