HUD is incapable of developing consumer useful GFE
Posted in RESPA reform By M C, Monday, July 21, 2008.HUD is too politically motivated to serve Bankers and Mortgage Bankers at the expense of the consumer. It was HUD that certified in the November 2, 1992 that the YSP disclosure "...would not have anti-competitive discriminatory aspects of the rule with regard to small entities nor are there any unusual procedures that would need to be complied with by small entities."
Since November 2, 1992 the requirement of only Mortgage Brokers having to put a number in a POC of GFE which is not a cost to the consumer (only interest rate, mortgage insurance and closing cost are) has created a firestorm of confusion in the courts and choices consumers make when shopping for a mortgage.
HUD has vastly proved they are too politically motivated (funds from Banks for political campaigns and jobs after leaving HUD) and all the corruption experienced by HUD officials to make such important rules for the consumers.
Is it not odd, HUD Secretary Preston headed up the Small Business Administration when it was exposing HUD’s poor rule making; now he has quickly been indoctrinated into HUD's defending bad rules recently exposed by both The Federal Reserve and The Federal Trade Commission?
Consumers do not care what a provider's revenue is; rather they care about the terms and cost they the consumers have for obtaining the product or service. The consumer can best investigate that when shopping for a mortgage when the GFE is the exact same for every originator without politically motivated with manipulated additions of a YSP. There is no value of YSP disclosure because it is not a cost to the consumer; only interest rate, mortgage insurance and closing cost are what the consumer shops.
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Submitted by Diane Cipa on July 22, 2008 - 4:12am.
If you dig deeply into the YSP debate and look for what is really bugging consumers and their advocates, I think you'll find fiduciary duty at the core.
Consumers have long believed that mortgage brokers are acting on behalf of the consumer. Most mortgage brokers perpetuate this belief by touting their various funding sources and their product knowledge and ability to help the consumer find the right mortgage, etc.
If the mortgage brokerage community accepted a fiduciary relationship with the consumer, the YSP issue would be moot. There would be an absolute duty to find the best deal for the consumer.
Until such time as mortgage brokers either clear the air and truthfully tell consumers it's a buyer beware type of transaction, expect legislators, consumer advocates, and regulators to be highly suspect of YSP and to continue to propose its demise.
There is nothing inherently wrong in the YSP model but there IS incongruity in the relationship between the mortgage broker and the consumer. Fix that and you've probably won the fight to keep YSP in the tool box.
Submitted by Dave Wirsching on July 22, 2008 - 4:19am.
Diane -
You hit it right on the head. Same thing goes for Lender's represntatives, RE Agents and anyone else "at the table." Its the only way RE is going to restore the consumer's trust.
Submitted by Diane Cipa on July 22, 2008 - 4:28am.
Thanks, Dave.
Submitted by Bruce Hahn on July 22, 2008 - 7:55am.
American Homeowners Grassroots Alliance
I agree with all of you. HUD is a bureacracy, and it has never aggressively sought out input from representatives of the homeowners it is charged with protecting. It should be no surprise that HUD rules much more relect the interests of business groups and companies that have the resources to develop far more deeper relationships with HUD staff. HUD should listen to all sides of course, but HUD personnel collectively probably spend at least ten times more time meeting with business representatives than with consumer representatives.
In our comments to HUD on the new RESPA rules, we suggested that mortgage brokers/lenders be required to disclose at their first meeting with home buyers that they owe no fiduciary duty to home buyers, and home buyers should not expect them to put the best interest of the buyers ahead of their own.
Submitted by M C on July 22, 2008 - 11:44am.
Diane,
Thank you for sharing your thoughts.
In response, YSP has nothing whatsoever to do with agency relationships. Nor is it a cost to the consumer. Only interest rate, mortgage insurance and closing cost are cost to the consumer. If these were not the only cost to consumer, how are banks and mortgage bankers getting away with only disclosing interest rate, mortgage insurance and closing cost? You appear to have been sucked in by the false statement that YSP is a cost to the consumer.
For disclosure of agency relationships, in Michigan, state law requires the Borrowers have disclosed "Borrower's Bill of Rights". One of the items disclosed is:
"5. You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you."
Oddly enough, you can tell the Legislative was not looking out for the consumer because only Mortgage Brokers are required to disclose what they will do for the Borrower. Enough of the political maneuvering. All originators should have to disclose the exact same information to all Borrowers. It is transparent and fair to the consumer.
The November 2, 1992 HUD rule that created YSP disclosure had no mention that the purpose was to disclose "Buyer Beware". See Federal Register/Vol. 57. No.212/Monday November 2, 1992/Rules and Regulations. This document specifically list the background for the rule. No YSP discussed. In the 27 page document, the only place that discussed YSP/SRP (yes they said Service Release Premium)was on page 21 in a Comment that talked about fees of the Borrower (which we know YSP/SRP are not Borrower fees as discussed above). The POC was for fees paid by the Borrower and paid in advance of the settlement (no to YSP/SRP). This same area had complete disregard for the Rules own definition of Lender ("Lender means the secured creditor or creditors named as such in the debt obligation and document creating the lien.") Note definition of Lender did not say where the source of funding came from.
Even HUD's Sample GFE listed in the 27 page document does not have a listing of YSP on it. Nor did HUD's line by line itemization of what goes onto the HUD-1 Settlement Statement.
So Diane, you can now be certain that the discussion of YSP has nothing to do with agency relationships. That is an entirely valid and separate discussion that ALL ORIGINATORS should have to disclose.
If you read the Federal Registry that has this document, you will be outraged at the incompetence of HUD in even being consistent with the United States Federal government's long history of the definition of Lender-- again it says nothing about the source of funding, rather the name of the creditor listed on the debt obligation.
Submitted by Diane Cipa on July 22, 2008 - 12:10pm.
Well, MC, we'll have to agree to disagree on that one. BTW - the YSP is a credit on page two of the proposed GFE.
Submitted by Matt Carter on July 28, 2008 - 12:54pm.
Here is "The Mortgage Professor" Jack Guttentag's take on how HUD proposes handling YSPs in the GFE.