WASHINGTON (10/24/08)—Changes to the Real Estate Settlement Practices Act, known as RESPA, will be out within the next two weeks, according to Federal Housing Administration (FHA) Commissioner Brian Montgomery. The FHA, an arm of the U.S. Department of Housing and Urban Development, has been working to revise rules for the 1974 RESPA since the late 1990s. The current proposal supplants one issued in 2002, scrapped by HUD after the Credit Union National Association (CUNA) and others noted that some of the proposed changes could be confusing to consumers and could have the opposite effect of an intended simplification. The current plan, as proposed, would:
* Make significant changes to the Good Faith Estimate (GFE) form, resulting in a new format for the GFE. That change is intended to ensure that the estimates are more accurate and to facilitate consumer comparisons between lenders. These changes will also facilitate comparisons between the GFE and the HUD-1 or HUD-1A settlement statement; * Ensure that borrowers are aware of the final loan terms and costs at settlement by requiring lenders read to each borrower a copy of a "closing script" containing the information; and * Clarify when it is appropriate to provide borrowers with discounts and average price costing of settlement services.
Montgomery made his timing announcement during Thursday’s Senate Banking Committee hearing on “Turmoil in the U.S. Credit Markets: Examining Recent Regulatory Responses.” Even this latest HUD RESPA plan has its share of critics. This summer 240 members of the U.S. House of Representatives signed a letter to HUD Secretary Steven Preston urging him to withdraw his agency's RESPA plan. The lawmakers petitioned Preston to "immediately commence" joint rulemaking with the Federal Reserve Board to produce "more simplified" mortgage and real estate settlement cost disclosure forms. The lawmakers said they are "profoundly concerned" that HUD plan—which involves hundreds of pages of rulemaking-- will "hinder rather than help the recovery of the housing market." The Credit Union National Association (CUNA) strongly supports the concept of amending the RESPA rules in order to simplify and streamline the home purchase and settlement process. CUNA believes that such changes would reduce out-of-pocket costs to consumers and increase quality of services. However, CUNA also has a significant number of concerns with the HUD proposal and has questioned whether the HUD plan makes the disclosure process more confusing for consumers, rather then less so. Use the resource link below to read more CUNA comments on RESPA changes.