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OMB completes review

Posted in RESPA reform By , Tuesday, November 11, 2008.

Looks like OMB completed its review of HUD’s proposed RESPA rule changes on Nov. 7, so HUD's got a shot at making that Nov. 20 deadline for making changes stick.There are reports that HUD pulled the requirement for a closing script from the final rule.

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Submitted by Diane Cipa on November 11, 2008 - 11:42am.

Well, if we can at least get uniformity in the GFE, they will have accomplished something of value for consumers.

 
Submitted by on November 11, 2008 - 12:57pm.

HUD has scheduled a conference call with reporters for 10 a.m. tomorrow.

Secretary Preston will "discuss new mortgage reform rules designed to help consumers shop for lower cost loans and avoid costly and potentially harmful mortgages."

 
Submitted by Diane Cipa on November 11, 2008 - 2:06pm.

Are you on that short list, Matt?

 
Submitted by on November 11, 2008 - 2:16pm.

I'll be dialing in. Anything you want me to ask, Diane?

Brian Montgomery will be providing "technical details."

 
Submitted by Diane Cipa on November 11, 2008 - 2:29pm.

Sure. If they are not using the closing script, is there still a comparison of the HUD-1 and GFE at the closing table?

 
Submitted by on November 11, 2008 - 2:52pm.

Thanks Diane. I'll ask them if/how they intend to accomplish a comparison of the HUD-1 and GFE.

I guess many questions will revolve around whatever changes have been made to the final rule, which will make it difficult because it may take a little time to digest the changes and think about their implications.

That's a complaint some industry groups have about the way the process works. If HUD made substantial changes based on comments they received on the proposed rule, there's no provision for commenting on the (potentially unforeseen) implications of those changes.

I guess at some point you have bring the process to a close and implement something.

 
Submitted by Howard A. Lax on November 11, 2008 - 3:00pm.

Just ask them how they addressed each of my comments on the proposal. See http://www.respanews.com/Media/PublicationsArticle/lax%20comment%20lette... . Then ask them if they fixed the rule as I suggested:

1. The consumer needs to be educated before shopping, not at the closing table. Move the script to the application phase as part of the GFE (which the lender or mortgage broker will prepare), make it an estimate, and provide a final script at the time of commitment (when the title agency and lender call the borrower to schedule the closing). That way the closing goes smoothly, the problems get ironed out before it is too late to do anything, and you can still have an electronic closing. By the way, reading a table to the consumer is extremely hard. Teach the consumer how to read a table or graph, and then give them a copy to study on their own.

2. Drop the tolerances until Congress gives HUD authority to impose tolerances. Allow brokers to estimate charges they have no control over (like recording fees) by providing a range.

3. I just saw a closing statement with a $165 mortgage recording fee that nobody noticed had an extra digit ($100). This stuff happens all the time. Most of the time, nobody catches these mistakes. Do title agents have quality control plans and do quality reviews of 10% of their closings like FHA mortgagees do? Why not?

4. HUD also needs to put its money where its mouth is. HUD should commit a hundred million dollars to public school education regarding buying and financing a home. The FDIC would probably match it to provide education on investments, saving, and banking. Stop worrying about those in foreclosure who are beyond help, and teach people what they need to know so they do not end up in foreclosure. An ounce of prevention is worth a pound of cure. Give a person a fish and he eats for a day. Give a person a fishing pole, and he might be able to make his mortgage payments.

5. A four page GFE in color is useless. Go get four of them, and see how easy it is to flip pages back and forth to compare costs and terms. What was wrong with the one page Pollock disclosure that everyone likes?

6. Revamp the HUD-1. Starting on page 2 is crazy. Borrowers should be able to compare GFE numbers and closing costs side by side on the same page (page 1).

7. Cost averaging should be limited to costs that are billed monthly and are not known at closing. HUD has no clue how to create a level playing field. HUD should also not shoot its mouth off about how much title agents are overcharging until HUD personnel have walked a mile in their shoes. Does any title agent think he or she is paid 40% more than they deserve?

8. HUD should stick to its mandate - closing costs. It has no business jumping into the FRB's domain of disclosing loan terms. Besides, the FRB has committed to revamping TILA disclosures for all types of loans. The FRB started with credit card disclosures last year. HELOCs are next, and then closed end loans. Why does HUD need to interfere with what the FRB has on its schedule? It took 12 years for HUD to dump the Servicing Disclosure Statement. All of a sudden it has to jump in and add loan disclosures?

9. The FRB may (some day) impose locks on loan originator compensation, if the consumer can understand them and the locks do not upset the secondary mortgage market. It should be HUD’s job to teach consumers what they need to know about loan origination fees well before time of application, so the FRB can do its job. If HUD wants to do something to make all brokers earn their keep, change the list of items that a broker needs to provide to earn a fee (Statement of Policy 1999-1). Add an accurate GFE as a mandatory service. Let the broker prepare an updated GFE seven days before the closing if the first one is not accurate. Brokers will comply with the law if they cannot get paid until they do comply.

10. HUD should not promulgate rules to stop abusive credit practices. The FRB has much broader authority (under HOEPA) than HUD has (under RESPA) to stop lending abuses. HUD looks like it is trying to one-up the FRB.

 
Submitted by Diane Cipa on November 12, 2008 - 5:36am.

Well, we are really at the end of a commenting process that started years ago. This most recent proposal was a re-write based upon many thousands of comments to the previous proposal which lead to many studies and so I look at that last round of commenting before the final rule as a fine tuning. You're right Matt, at some point, you have to stop and implement something.

The old rules at just that "old" and we need an update. No rule will make everyone happy and in defense of regulators, based upon what happened to create our credit crisis, the industry insider perspective doesn't carry much weight anymore. They've been saying one thing in public hearings and doing something entirely different at street level now for years. The bright light of truth shined on the corrupted houses of real estate, mortgage, and title insurance.

Consider whatever we get in this final rule as MEDICINE designed to help us heal. We'll survive and perhaps in a year or two look back and say "That really wasn't so bad. Wonder what all the RESPA proposal fuss was about?"