Everyone hates RESPA proposal?

"There’s almost universal agreement on the new RESPA rules that the U.S. Department of Housing and Urban Development could issue as soon as next week—everyone hates them."

So says Mariwyn Evans, writing for NAR's Realtor Magazine. Well, of course it's a little more complicated than that.

Consumer groups testifying before Congressional lawmakers Sept. 16 had plenty of ideas about how to strengthen consumer protections in HUD's proposed RESPA rule changes, but it wouldn't be fair to say they hate them (see story).

In her testimony on behalf of the Center for Responsible Lending, Rebecca Borné said the group's major beef with the proposed rule changes was the handling of yield spread premiums. While HUD would require that YSPs be disclosed on the GFE and credited against the borrower's closing costs, CRL says that's not good enough -- they should be eliminated.

Others who position themselves as consumer advocates, like the "Mortgage Professor" Jack Guttentag, says as long as mortgage brokers aren't pocketing them, YSPs can be helpful to borrowers who need money to cover their closing costs (see discussion). HUD's proposed handling of the issue seems to consider this perspective.

Despite her quarrel with HUD's approach to YSPs, Borné said reforms to the current disclosure requirements are "long overdue."

While many in the industry have called for the proposed rule to be withdrawn, Borné said, CRL has not added its voice to those efforts, because "the rule does represent important strides forward, and, with recommended improvements, could achieve real progress with respect to disclosure. HUD should not be asked to start from square one and completely overhaul its proposed rule."

Margot Saunders, testifying for the National Consumer Law Center, had similar issues with HUD's proposed handling of YSPs, and said consumers need to see the APR to compare loans (HUD says they get that on the TILA disclosure and that tests show the proposed GFE allows consumers to pick out the best loan package).

Saunders said that while she had not been asked what the group liked about the proposed rule change, HUD’s proposal "includes many positive features which we heartily endorse and which we believe will improve the transparency of the complex mortgage settlement process."

HUD's proposal "is a good way down the road toward positive reform of the RESPA regulations," Saunders said. "We do not believe that the current effort should be suspended – just continued.

As noted here the other day, HUD probably has to publish a final rule by Nov. 20 if they are serious about making it stick.