Regulators and investigators for HUD (Department of Housing and Urban Development) might do well to consider the "broken windows" theory of policing when it comes to overseeing compliance with RESPA (the Real Estate Settlement and Procedures Act).

The broken windows theory has its origin in experimental work done as far back as the 1960s, but its first significant introduction to the public occurred in a March, 1962, Atlantic Monthly article by James Q. Wilson and George L. Kelling. The theory gained considerable currency when employed in the 1990s by New York City's then-mayor, Rudolph Giuliani, and his police chief, William Bratton.

In the Atlantic article, Wilson and Kelling wrote, "… if a window in a building is broken and is left unrepaired, all the rest of the windows will soon be broken. This is as true in nice neighborhoods as in rundown ones … one unrepaired broken window is a signal that no one cares, and so breaking more windows costs nothing … ."

In a nutshell, the theory is this: Little things matter. Take care of them and you will avoid the big problems later on.

So what does all of this have to do with HUD and RESPA?

HUD is charged with enforcing RESPA, a 1974 law that was enacted with the intent of protecting consumers during the home purchase process. RESPA has two main areas of emphasis: (i) giving consumers better advance disclosures of settlement (closing) costs, and (ii) eliminating kickbacks or referral fees that unnecessarily increase closing costs. The latter is directed towards the practices of various "real estate settlement service providers." Those entities include lenders, title companies, escrow companies, termite inspectors, insurance companies, and, of course, real estate brokers and agents.

RESPA generally prohibits settlement service providers (SSPs) from giving money or other benefits to real estate agents as a compensation for referrals or as an inducement to give referrals. It is a law that is widely and commonly violated. All over the country all sorts of benefits -- from underwriting continuing education courses to subsidizing advertising costs -- are provided to real estate agents by SSPs. These are not provided simply because the service providers happen to like the agents; they are given as inducements to do business with those who supply them. They wind up adding to the costs of services that consumers must purchase.

But these are "little" violations of RESPA. Just as petty vandalism in the streets does not make the six o'clock news the way a major drug bust does, the everyday RESPA violation is not as noteworthy as the uncovering of a complicated and illegal title reinsurance scheme. In both cases, the newsworthy crime is one that involves larger dollar amounts. Although it is doubtful, in both cases, whether the dollar amounts in the high-profile cases are equivalent to the cumulative dollar amounts involved in the "little" cases. Few would question that the cumulative effects of the "little" RESPA cases result in referrals whose total value far outweighs those of the referrals that are brought about because of bogus reinsurance schemes.

HUD should pay more attention to the "broken windows," to the myriad little violations of RESPA than it does to the big ones. As a whole, consumers would be better off; and, even more to the point, there would probably be fewer big violations.

Just as happened with traditional policing, HUD defenders might well reply that there is simply not enough staff to chase all the little violations. Of course. And just as police departments have learned to reach out to and rely upon community supporters, HUD regulators need to make greater efforts to work with the organized real estate community, and vice-versa. The National Association of Realtors® (NAR), and the various state associations, are natural potential partners to be enlisted in an effort to fix the broken windows that now predominate over the real estate landscape.