On February 21, 2008, the U.S. Department of Housing and Urban Development (HUD) issued an informal (and non-binding) staff interpretation regarding home warranty companies, which seemed to raise more questions than it answered, primarily on the issues of marketing agreements and the marketing of home warranties. The agency found itself besieged by industry groups demanding clarification. Last week HUD finally provided amplification of its original letter and established clearer guidelines on the circumstances under which home warranty companies may compensate real estate brokers and agents for marketing their products.

Foley & Lardner issued an E-News Alert to clients and contacts detailing the new rules’ likely impact. In it, we note that, although directed at agreements between HWCs and real estate brokers and agents, the rule likely will have a broader impact, affecting many other providers who offer services in the residential real estate market.