A sizable chunk of the U.S. Congress wants the White House to rethink a proposal to reform the Real Estate Settlement Procedures Act.
Two hundred and twenty-six members of Congress last Friday sent a letter to the Office of Management and Budget urging the White House agency to reject the Department of Housing and Urban Development’s RESPA proposal, which was submitted to OMB for its review in December 2003.
The letter written by Reps. Judy Biggert (R-Ill.) and Ruben Hinojosa (D-Texas) stated that the signatories supported HUD’s efforts to improve the home-buying process, but disapproved of the way in which HUD submitted its final proposal to OMB. OMB has 90 days from the date of submission to return its comments.
“When a rule produces this much uncertainty and opposition from so many quarters, federal agencies usually respond by reconsidering their proposed actions, making changes to the proposed rule, and again soliciting public comment. However, instead of issuing a revised proposed rule and seeking additional public comment, HUD has chosen instead to finalize the rule without advocates, affected industries or Congress knowing what changes have been made,” the letter stated.
Real estate industry groups have been united in their opposition to HUD’s original 2002 RESPA proposal, which would have revamped the good faith estimate lenders use to disclose costs to borrowers and facilitated packaging of loan origination and settlement service fees. Brokers, home builders and title companies criticized the proposal because they believed combining loan origination and settlement service fees into one package would prevent them from such packages in competition with lenders’ packages. The American Land Title Association, National Association of Realtors and other groups supported a two-package approach that would have permitted settlement services providers as well as lenders to sell packages of real estate services.
HUD’s initial proposal generated more than 40,000 public comment letters, and Congressional committees held at least three hearings to highlight objections and recommended changes to the original proposal. Yet HUD finalized the rule and submitted it to OMB without allowing anyone to read it.
The letter from the Congressional representatives to OMB advocated a second public comment period on HUD’s regulations.
“Until there are assurances that any of the proposed changes will result in real benefits that far outweigh the potentially negative consequences, a final rule should not be promulgated. There is too much at stake to rush quickly to judgment on an issue of such magnitude. Therefore, we seek your assistance by asking that you return the RESPA rule to HUD with instructions to issue a revised proposal that reflects HUD’s most recent reform plans and provides for an additional public comment period,” the letter stated.
After the letter became public, ALTA issued a statement applauding Biggert and Hinojosa for their efforts. The association has been very vocal about its dislike of the reform measure and has threatened to sue HUD if the final regulation is unfavorable to its members.
“We are grateful that Representatives Biggert and Hinojosa share our concerns that HUD’s proposed rule would have a negative impact on the real estate industry and consumers. We hope with all of this attention, OMB will get the message to send the rule back to HUD for reissue,” ALTA President Charles Kovaleski said in the statement.
A policy advisor to Hinojosa later clarified that the signatories support efforts to simplify the mortgage application process and that the goal of the letter was to convince OMB to send the proposal back to HUD with instructions to re-propose it and allow public comment.
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