Robertson also agreed with HUD’s conclusion that banks and other direct lenders can’t be required to disclose that they sometimes receive payments called "service release premiums" when they resell particularly desirable loans to secondary-market investors.
HUD argued that those premiums are paid after settlement, and depend on unknowns like when the loan is sold and market conditions.
"Direct lenders cannot be expected to disclose what they do not know," Robertson said in his decision.
Although HUD made "a persuasive case" for disclosure of yield-spread premiums and for exempting direct lenders from disclosing service release premiums, its "most difficult task" was to show that the GFE would not put mortgage brokers at an unfair disadvantage, Robertson said.
"If the new GFE distorts the marketplace by providing an artificial advantage to direct lenders, it would scuttle HUD’s reform effort, and run afoul" of the Administrative Procedures Act, as NAMB alleged, Robertson said.
But Robertson agreed with HUD’s conclusion that several rounds of consumer testing demonstrated that, nine times out of ten, the new GFE enabled consumers to pick the best loan — regardless of whether it was offered by a mortgage broker or a direct lender.
All other things being equal, a loan originated by a mortgage broker that carries a yield-spread premium will show a higher adjusted origination charge on the GFE than a loan made by a direct lender. But if the yield-spread premium is used to offset charges for settlement services, the mortgage broker and direct lender will both show the same amount for overall settlement charges on the first page of the GFE, Robertson noted.
A 2004 study conducted by the Federal Trade Commission found that an "asymmetric disclosure" policy could bias consumers against mortgage brokers. But the FTC study used a partial, earlier draft of the GFE, Robertson noted, and "does not directly undermine the study on which HUD bases the (final) GFE."
NAMB also argued that HUD acted in an "arbitrary and capricious" manner, and failed to consider alternatives to the new GFE.
In his opinion, Robertson rejected the idea of conducting further research, saying "the mass of academic studies and consumer testing that HUD has already compiled — six years of study and seven rounds of testing — is enough."
In a statement, NAMB President Jim Pair said the Robertson’s decision "effectively guarantees that the consumer will continue to be confused during the loan selection process." …CONTINUED