Join the debate

If you haven't joined the debate over HUD's proposed changes to the Real Estate Settlement Procedures Act (RESPA), you've got another month to dive into an issue that could transform the way real estate is bought and sold. At the request of the industry -- backed by a letter signed by 148 members of Congress -- HUD has extended the public comment period on its proposed changes to RESPA from May 13 to June 12 (see story).

On March 14, HUD proposed simplifying loan disclosures and creating incentives for packaging settlement services like title insurance with mortgage loans, which the department estimated could save consumers $8.35 billion a year.

The last time HUD tried to tinker with RESPA, there was such an uproar over packaging that HUD was forced to withdraw its plan. After holding industry roundtables and conducting extensive consumer testing of simplified disclosures, HUD came back almost four years later with a new plan that includes more subtle incentives for packaging (HUD is no longer promising there will be a "safe harbor" from prosecution under RESPA's anti-kickback provisions).

But those and other aspects of the proposed RESPA rule change (including lengthy scripts to be read at closing) have stirred up serious debate. To get a taste of where some people stand on the issues, check out the RESPA reform group in the Community section at Inman.com.

You'll see that some see HUD's proposal as an opportunity for settlement services providers like title agents who want to compete for business by offering consumers the best services and price -- as opposed to wooing industry professionals who can generate referrals for them, such as real estate brokers and builders. Supporters tend to agree with HUD's analysis that the rule changes will encourage homebuyers to shop around for settlement services, and there are already some Web sites cropping up to help them do just that (see story).

Some folks in this camp are worried that industry giants who like the way business is often conducted today -- between real estate professionals, instead of between settlement service providers and consumers -- will succeed in shooting down HUD's latest attempt at "RESPA reform."

But others fear the rule changes could slam the door shut on small, independent settlement services providers. Lenders, they say, will be more likely to make package deals for settlement services with big companies or steer homebuyers to affiliated businesses they have an ownership interest in. Instead of saving consumers money, some critics say, the rule changes will help bigger players boost profits at the expense of small, independent companies.

The American Land Title Association, which has drawn up a laundry list of issues its members have with HUD's proposal, helped organize the push for an extended comment period.

ALTA says its Web-based "action center" helped generate nearly 3,000 letters to members of Congress, asking that the public comment period to be extended by 60 days (which, with the November election fast approaching, might have left the issuance of a final rule up to the next administration).

The members of Congress who drafted the letter to HUD -- Representatives Ruben Hinojosa, D-Texas, and Judy Biggert, R-Ill. -- organized a similar campaign in 2004 that eventually resulted in HUD withdrawing its proposed rule change (a Hinojosa aide said at the time the goal was to allow for public comment, not to kill HUD's RESPA reform efforts).

Back in 2004, Hinojosa and Biggert convinced 226 lawmakers to sign a letter to the Office of Management and Budget, complaining that HUD had issued a final rule without an opportunity for additional public comment.

This time, 148 members of Congress signed a May 5 letter asking HUD to extend the comment period by 60 days. Democrats outnumbered Republicans 84 to 64, and prominent Democrats who signed the letter included Dennis Kucinich, Rahm Emanuel, Maxine Waters, Barbara Lee and Jesse Jackson Jr.

While HUD agreed to an extra 30 days of public comment (rather than the 60 requested), Deputy Secretary Roy Bernardi insists HUD remains committed to finalizing a rule before President Bush leaves office.

ALTA CEO Kurt Pfotenhauer said in a statement that while the group "would have preferred a 60-day extension, we will use the time allotted to conduct a more thorough review of the proposal and its impacts on the title industry in order to provide feedback to HUD that is meaningful and helpful."

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