RESPA: HUD Mobilizes RESPA Ideas

HUD wants to simplify the real estate settlement process for consumers, augment the ability of consumers to shop for settlement services, and improve disclosures required by RESPA. To accomplish this, HUD would change how broker compensation is disclosed, streamline the GFE, and allow bundling of services for guaranteed costs. This has ominous echoes of the ideas put forward by HUD staff several years ago when they worked with the Federal Reserve staff on ways to make Truth in Lending and RESPA less burdensome and more effective.

The proposal is currently under review at the Office of Management and Budget. It then goes to the congressional oversight committee before being published.

To add panache to the announcement, HUD Secretary Martinez revealed a "homebuyer bill of rights." This would be a set of principles that would guide the settlement process. The homebuyer rights include the right to receive settlement cost information early in the process to encourage shopping, and the right to benefit from new products, competition, and technological innovations that could lower settlement costs.

The project involves several goals: changing the way lender payments to brokers are recorded and disclosed to consumers, "significantly" improving the GFE disclosures, and removing regulatory barriers to allow market forces and increased competition to promote greater choice for consumers. Since the first two steps involve the probable increase of barriers, it will be interesting to see how HUD actually pursues these goals.

For example, the improvements to the GFE involve making cost disclosures firmer so that consumers can rely on GFE numbers and comparison-shop for services. That is most likely to cause service providers to increase the costs disclosed.

According to FTC Chairman Muris, the Federal Trade Commission expects to work with HUD on this project - an interesting development as the FTC has no enforcement authority under RESPA.

While this will probably be a useful campaign issue in 2004, it is more likely to hamper the real estate lending process if HUD pursues the ideas put forward in its report to Congress on RESPA reform.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 8, 7/02