Biggert’s planned amendment to HR 3126 is more likely to get a hearing in the Senate, since that bill was introduced by Rep. Barney Frank, D-Mass., to create a Consumer Financial Protection Agency along the lines proposed by the Obama administration.
HR 3126 already includes some RESPA provisions, including language that would transfer responsibility for enforcement RESPA to the new agency, and instructing it to draw up a new uniform mortgage disclosure form that would meet both RESPA and TILA requirements as the lending industry has requested.
If Congress doesn’t intervene and HUD’s RESPA rule changes are implemented Jan. 1, it remains to be seen whether the industry’s warnings about the potential for unintended consequences are warranted.
In their letter to HUD, industry groups representing lenders said it is unlikely lenders will continue processing loan preapprovals — the first step for many consumers in the house hunting process — unless HUD issues further guidance on how the new RESPA rules apply.
Under the new RESPA rule, the only charge lenders are allowed to assess in preparing a GFE is for a credit report, the groups said. It’s not clear if the RESPA rules allow lenders to generate preapproval letters before delivering a GFE. Loan originators need to know whether they can deliver a GFE and charge an application fee before they are supplied with an address, and then revise the GFE once they are provided with an address, industry groups said.
But HUD maintains that the RESPA rule does not address preapprovals, which are governed by regulations that are enforced by the Federal Reserve.
Industry groups also argue that HUD’s interpretation of the new rules will discourage lenders from providing borrowers with lists of third-party settlement services providers, or that such lists will exclude small companies.
In a recent Inman News column, ClosingCorp Inc. CEO Anthony Farwell made a similar point, saying the final rule encourages lenders to supply only short lists of service providers with whom they regularly work. Lenders will keep the lists short to guarantee that estimates on the GFE are within the required 10 percent of the final cost, even though those estimates may be higher than local rates, he said.
"That does not foster genuine consumer choice," Farwell said. "Unless they are encouraged to do their homework, consumers will never know whether they are getting a good deal. Consumers must be educated, but the new rules don’t do so. In this regard, the government’s RESPA reform has failed."
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