The deadline is fast approaching on the White House Office of Management and Budget‘s 90-day review of the U.S. Department of Housing and Urban Development’s plan to revamp the Real Estate Settlement Procedures Act.
RESPA watchers expect OMB to issue a decision or recommendation to HUD sometime next week; however, OMB has not said whether its review will be finished on time.
HUD has kept the proposal it sent to OMB in December under wraps, so no one knows whether it follows the same lines as HUD’s original thinking or incorporates some material changes to the initially proposed regulations. The outcome is important because new RESPA regulations would have far-reaching repercussions for real estate loan and settlement companies.
HUD submitted its RESPA proposal to OMB for its review in December 2003, nearly a year and a half after the department’s first rumblings on the subject. OMB has a 90-day review period.
The original proposal would have revamped the good faith estimate lenders use to disclose costs to borrowers and facilitated packaging of loan origination and settlement service fees.
President George W. Bush has said he supports changes to the mortgage process because the home-buying process needs to be simplified.
“If you’re a first-time home buyer and you take a look at one of these mortgage application forms, you pass out over the amount of small words in the thing. It makes you nervous. So we’re simplifying it. We’re helping people understand what it means to buy a home,” the President said in a January speech.
The Federal Trade Commission took a dim view of the mortgage broker compensation disclosures in the July 2002 version of HUD’s proposal. The agency said the regulations could confuse borrowers, cause them to more expensive choose loans and create a bias among borrowers against broker-offered loans, among other findings.
HUD spokesperson Brian Sullivan said the housing agency welcomed the FTC’s findings and believed them to be useful.
“FTC and HUD both believe that in the end consumers would benefit from the reforms suggested. This is one element of the reforms,” he said.
Realty brokers, home builders and title companies criticized HUD’s original packaging plan because they believed combining loan origination and settlement service fees into one guaranteed-price package would prevent them from offering packages that could compete with lenders’ packages. The American Land Title Association, the National Association of Realtors and others supported a “two-package” approach that would permit settlement services providers as well as lenders to sell packages of real estate services.
ALTA has threatened to sue HUD if the regulation is unfavorable to its views.
“If the rule is substantially similar to the proposed rule, ALTA has been directed by its board to institute litigation challenging the regulation,” Stanley Friedlander, president of ALTA and Continental Title Agency Corp., told a Congressional committee in January testimony.
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