An open letter to California Senators Dianne Feinstein, Barbara Boxer and HUD Secretary Shaun Donovan

Dear Secretary Donovan, Senator Feinstein, and Senator Boxer:

Thank you in advance for your attention to this vitally important matter. As a Californian and a reporter, I am writing this open letter requesting clarity regarding Natural Hazard Disclosure statements and their status within the Real Estate Settlement Procedures Act (RESPA).

In a highly publicized legal action brought by HUD last year, an agreement was made with all parties that the Natural Hazard Disclosure Statement (NHDS) in California would be considered a “settlement service” as part of the escrow process and would be subject to RESPA federal regulations.

While HUD vigorously pursued a determination, they have yet to put in writing the fact that the NHD report is a settlement service under RESPA.

I have spent several months researching the law and inspecting HUD required documents, and along with my associates, have interviewed various HUD executives and experts. We have yet to find anything in writing to indicate that NHD reports in California are to be treated as settlement services.

The NHDS along with the TDS (Transfer Disclosure Statement) are the most important consumer protection documents in a real estate transaction. They are required by law and under the California Civil Code are the only documents that give the buyer the right of rescission during escrow. The NHD report gives notice to the buyer of known material facts that can impact the desirability and/or value of the property.

When you buy a home in California, there are a host of fees charged for “settlement services” that must be paid by the seller before the deal closes. These include such things as city and county taxes; the appraisal fee; the credit report fee; title and escrow fees; and additional costs for such things as insurance and the lender’s inspection fee.

The determination made by the HUD lawsuit was that the NHDS must be included in this list of services; and is thus subject to strict federal laws, and must be paid for before the escrow disburses funds. Furthermore, by not notifying real estate agencies and consumers, they run the risk of being sued for not complying with a federally mandated settlement service.

Although HUD vigorously pursued its belief that NHDS companies are indeed settlement services, they still have nothing in writing that reflects this position to the public.

The fact remains that HUD continues to give out misinformation. For instance, last month one of my associates spoke to Kevin Stevens, a compliance protection specialist with HUD. When asked if NHD’s are a required settlement service in California, he replied they were, and that they were listed in Section 1300 of HUD-1, a document that outlines various settlement services for homebuyers.

Well, I checked and they’re not listed there.

We also asked Brian Sullivan, a HUD spokesman, if NHDS reports are a settlement service and he too said they were ‘most certainly a settlement service,’ and when asked if HUD was enforcing this mandate, he stated, “We believe so. If not, it’s a violation of RESPA.”

So we asked Sullivan that if HUD is really enforcing this new mandate, why weren’t the NHDS included in HUD-1 as a settlement service for real estate transactions that occur in California?” Sullivan didn’t exactly have an answer for that one. “It’s not a requirement across the country, just in certain states,” he said.

No one here at RE-Insider can find any communication from HUD that reflects Mr. Sullivan comments. No mention on HUD-1 was made and there was no official or unofficial communication posted.

Kirsten Ivey-Colson, an attorney with HUD’s Office of Finance and Regulation Compliance, insists that California state law requires that this disclosure is made. “Because it is paid at closing, it appears on HUD-1,” she said.

Well, it doesn’t appear on HUD-1. We checked.

There is nothing that tells buyers, sellers, real estate agents, lenders, title companies or escrow companies in California that NHD’s are a settlement service and legally required.

I believe that as U.S. Senators representing the people of California, you want buyers to receive all legally-required full disclosure documents for the properties they are about to buy. I also believe that it is Secretary Donovan’s agency’s responsibility to ensure that everyone across the board is treated equally and fairly by being made aware of this requirement before they are lead down a legally sticky path of ignorance of the law.

Look at it this way: In the United States of America, we are taught that a law requirement MUST be in writing, posted and readily available. Well, when buying a home, which is the biggest and most important purchase most of us will ever make in our lives, shouldn’t the legal process be transparent?

While this letter comes from me, I urge anyone who will ever consider purchasing a home or who has recently purchased a home to contact Sen. Dianne Feinstein, D-Calif., Sen. Barbara Boxer, D-Calif., and HUD Secretary Shaun Donovan and urge them to bring some clarity to this issue.

Ask them — Is this a service that I, the homeowner, must pay for before my escrow can close? And if I am a real estate agent, or escrow or title officer, must I pay for this service out of escrow monies?

Federal requirements should be able to be read someplace, somewhere. It’s the least we can do for California homeowners and the real estate industry.


Serena Ehrlich

P.S. For those who are interested, here’s the contact information for Feinstein, Boxer and Donovan:

Senator Dianne Feinstein
United States Senate
331 Hart Senate Office Building
Washington, D.C. 20510
Phone: (202) 224-3841
Fax: (202) 228-3954 TTY/TDD: (202) 224-2501

Senator Barbara Boxer
112 Hart Senate Office Building
Washington, D.C. 20510
Phone:(202) 224-3553
Fax;(202) 224-0454 (fax)

Shaun Donovan
Secretary of the U.S. Department of Housing and Urban Development
451 7th Street S.W., Washington, DC 20410
Phone: (202) 708-1112
TTY: (202) 708-1455


ATTENTION: AB 957 Assembly Judiciary Committee votes this TUESDAY! Show your support!


We did it! As you know by now, AB 957 passed the first round of votes with solid bipartisan support just two weeks ago. Thank you so much for all the letters you sent. They made a real difference.

This coming Tuesday, the Assembly Judiciary Committee is holding their vote on AB 957 and once again we need your help to prompt these legislators to vote YES.

Below is a list of committee members and their contact information. Please do me and the entire real estate industry a favor and print out this letter, sign and fax it to the assembly members listed below.

Two weeks ago, AB 957 passed the Banking and Finance Committee with bipartisan support! That first committee meeting victory is due to all of you who faxed a letter of support.

RE: Assembly Bill 957 – The Buyer’s Choice Act

Dear Assembly Member:

I support AB 957, The Buyer’s Choice Act. This is important legislation that affects my business and must be enacted!

I understand that this bill will prohibit banks (sellers who acquired title to residential real property at a foreclosure sale) from requiring the buyer to purchase title insurance or use escrow services chosen by the seller/bank. And it would prohibit a seller/bank from, without good cause, disapproving the use of a title or escrow company chosen by the buyer.

Of particular importance is the language in the bill that prevents a bank who is a seller from disapproving of a buyer’s choice of title, escrow and settlement companies without good cause. This will help prevent the current practice of large banks from putting inappropriate pressure on buyers to agree to use companies that provide an advantage to the banks in the transaction.

This bill will put the choice of affiliate services back where it belongs, with the consumer. Thank you for undertaking this important legislation in California.



(Printed Name)

(Company Name)

(Street Address, City, State, Zip)

(Phone Number)

CC: Assembly Member Cathleen Galgiani, FAX 916-319-2117

Assembly Judiciary Committee

Assemblymember Mike Feuer (D) – Chair
State Capitol, Room 3146
Sacramento, CA 95814
Fax: 916-319-2142
Counties: Portions of Los Angeles
Main Cities: Beverly Hills, Sherman Oaks, West Hollywood, West Los Angeles

Assemblymember Van Tran (R) – Vice Chair
State Capitol, Room 4130
Sacramento, CA 95814
Fax: 916-319-2168
Counties: Portions of Orange
Main Cities: Costa Mesa, Garden Grove, Westminster, Fountain Valley, Stanton, Anaheim, Newport Beach

Assemblymember Julia Brownley (D)
State Capitol, Room 2163
Sacramento, CA 95814
Fax: 916-319-2141
Counties: Portions of Los Angeles, Portions of Ventura
Main Cities: Agoura Hills, Calabasas, Los Angeles, Malibu, Oxnard, Port Hueneme, Santa Monica, Westlake Village

Assemblymember Noreen Evans (D)
State Capitol, Room 6026
Sacramento, CA 95814
Fax: 916-319-2107
Counties: Napa, Solano, Sonoma
Main Cities: American Canyon, Calistoga, Napa, St. Helena, Santa Rosa, Vallejo, Yountville

Assemblymember Dave Jones (D)
State Capitol, Room 6005
Sacramento, CA 95814
Fax: 916-319-2109
Counties: Portions of Sacramento
Main Cities: Sacramento

Assemblymember Steve Knight (R)
State Capitol, Room 2016
Sacramento, CA 95814
Fax: 916-319-2136
Counties: Portions of Los Angeles, Portions of San Bernardino
Main Cities: Adelanto, Lancaster, Palmdale, Victorville

Assemblymember Paul Krekorian (D)
State Capitol, Room 4005
Sacramento, CA 95814
Fax: 916-319-2143
Counties: Portions of Los Angeles
Main Cities: Burbank, Glendale, Los Angeles, North Hollywood

Assemblymember Ted Lieu (D)
State Capitol, Room 3173
Sacramento, CA 95814
Fax: 916-319-2153
Counties: Portions of Los Angeles
Main Cities: Lomita, Torrance, Redondo Beach, Hermosa Beach,
Manhattan Beach, El Segundo, Venice, Westchester, West Los Angeles,
Marina Del Rey, Playa Del Ray, Mar Vista

Assemblymember William Monning (D)
State Capitol, Room 5150
Sacramento, CA 95814
Fax: 916-319-2127
Counties: Portions of Monterey, Portions of Santa Clara, Portions of Santa Cruz
Main Cities: Carmel by the Sea, Monterey, Morgan Hill, Santa Cruz

Assemblymember Jim Nielsen (R)
State Capitol, Room 6031
Sacramento, CA 95814
Fax: 916-319-2102
Counties: Portions of Butte, Colusa, Glenn, Modoc, Shasta, Siskiyou, Sutter, Tehama, Portions of Yolo
Main Cities: Alturas, Anderson, Chico, Colusa, Orland, Red Bluff, Redding, Weed, Yuba City

Assemblymember Cathleen Galgiani (D)
State Capitol, Room 5155
Sacramento, CA 95814
Fax: 916-319-2117
Counties: Merced, Portions of San Joaquin, Portions of Stanislaus
Main Cities: Atwater, Lathrop, Merced, Newman, Stockton, Tracy