WASHINGTON (9/11/08)—Proposed changes to the Real Estate Settlement Practices Act, known as RESPA, will come under the scrutiny during a House Financial Services subcommittee hearing Sept. 16. Rep. Melvin Watt (D-N.C.), chairman of the subcommittee on oversight and investigations, announced Wednesday that he intends to gather testimony from representatives of the U.S. Department of Housing and Urban Development (HUD), which has developed the proposed changes, consumer advocates and industry representatives. In March, HUD unveiled long-awaited proposed revisions to RESPA and sought comment. HUD has been working since the late 1990's on revising its rules implementing the 1974 RESPA law with a view to improving the mortgage process and to lower settlement costs for borrowers. 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 the intended simplification In part, the current proposal 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.
Watt said his subcommittee will be investigating the costs, regulatory burdens and other impacts of the proposed RESPA rule. The HUD RESPA plan has many critics. In fact, 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. “To expedite this process, we also ask you to discard the hundreds of pages of HUD’s current proposed RESPA rule that have not previously been the subject of public comment and cover a number of subjects beyond disclosures,” the letter requested. The lawmakers said they are “profoundly concerned” that HUD plan 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.