The Department of Housing and Urban Development says it’s willing to modify, but not withdraw, a proposal to overhaul loan disclosure forms and revamp rules governing the provision of settlement services — resisting calls by industry groups and a majority of members of the House of Representatives to scuttle the plan.
In an Aug. 7 letter signed by more than 240 House colleagues, Reps. Ruben Hinojosa, D-Texas, and Judy Biggert, R-Ill., urged HUD to withdraw proposed changes to the Real Estate Settlement Procedures Act (RESPA), and work with the Federal Reserve on simplified disclosure forms instead (see story).
HUD says its proposed changes to RESPA — which include a new, four-page Good Faith Estimate that’s intended to help home buyers comparison shop for a loan, title insurance and other settlement services — would save consumers $8.35 billion a year.
But the Fed and industry groups want HUD to develop a single disclosure form that complies with not only RESPA, but the Truth In Lending Act (TILA), so consumers aren’t subjected to "information overload."
In their letter to HUD Secretary Steve Preston, Hinojosa, Biggert and a majority of their House colleagues also demanded that HUD abandon RESPA rule changes that would create incentives for loan originators to package settlement services such as title insurance with loans.
Responding Monday on behalf of Preston, Assistant Secretary Sheila Greenwood noted that HUD had previously extended the public comment period on the changes at Hinojosa and Biggert’s request. HUD "continues to carefully consider" comments, and "will make appropriate modifications and improvements to the rule," Greenwood said.
But Greenwood indicated that HUD is not prepared to back down from its proposed rule changes altogether, as it did after Hinojosa and Biggert organized opposition to HUD’s last attempt at overhauling RESPA in 2004.
"The current housing finance situation has dramatically highlighted the need to move forward responsibly and expeditiously with measures to help American home buyers," Greenwood said. "Many of the current difficulties, including the high rate of foreclosures, have been caused in part by consumers not fully understanding their loan terms and costs. The Department believes that a rule is needed to help consumers avoid such difficulties in the future."
HUD "has been listening hard to all of the stakeholders in this process, and intends to strike a proper balance among their concerns," Greenwood said.
A spokesman for Hinojosa said that because HUD’s response came from Greenwood rather than Preston, he does not consider it a response from HUD.
Hinojosa, who was on his way back from a trip to Iraq when HUD issued Greenwood’s response, "is very upset and insulted HUD would send a letter from an underling to 244 members of Congress without responding himself," said policy advisor Greg Davis. "Technically, we have not received a response from the congressman’s letter on the RESPA rule."
The Hinojosa-Biggert letter to HUD was signed by 243 voting members of the House, including 128 Democrats, 114 Republicans and Texas independent Rep. Ron Paul. Rep. Luis Fortuno, R-Puerto Rico, who is a nonvoting member of the House, also signed.
Davis said that because HUD has not responded to a request for information about Greenwood’s city of residence, the letter "will be treated as regular non-constituent mail" by Hinojosa’s office.
HUD spokesman Brian Sullivan said that it was "completely appropriate" for Greenwood, as the assistant secretary for congressional and intergovernmental relations, to "provide a thoughtful response to a congressional inquiry" on behalf of Preston. HUD’s response would have been the same no matter who signed the letter, Sullivan said.
Although HUD has said it intends to publish a final RESPA rule this fall for implementation in 2009, there’s been speculation that the next administration could take a different course.
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