Troon Management Corp. - Affiliated Business Arrangements

THE HISTORY OF AfBA's

The 1973 RESPA provisions were issued in response to calls for implementation of federal limits on charges for settlement services in relation to federally related mortgage loans intended for residential use.

Originally the provisions of RESPA addressed:

Use of standard settlement forms
Advance disclosure of settlement costs required
Buyers receive a special booklet of explanation
Sellers have to disclose what was paid for the property
Prohibition of kickbacks and unearned fees
Limitations on escrow amounts

There were additional revisions to RESPA made in 1976 offering further clarification of the above outlined provisions, however, it wasn't until 1983 that RESPA amendments were made addressing controlled businesses.

The purpose of this amendment was to focus attention on controlled businesses and the use of the mandatory disclosure and anti-coercion provisions. This was the beginning of what we know today as the Affiliated Business Arrangement.

In 1996, following a 1991 "sting" operation in the Philadelphia and Chicago marketplaces, HUD formulated rules and regulations for structuring RESPA compliant affiliated business arrangements. HUD subsequently offered the "Core Title Requirements" outlining the actual duties the AfBA Agency must perform.

Since the time that the provisions allowing Controlled Business Arrangements were amended in 1983, and HUD's issuance of guidelines in structuring AfBA's in 1996 - 1998, many firms have taken advantage of forming strategic alliances in ancillary industries. The implementation of Graham, Leach, Bliley has significantly increased the scope of AfBAs.

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