Two congressional hearings are scheduled Tuesday on issues that could have a big impact on housing markets: a proposal to overhaul rules governing settlement procedures and legislation that would allow the continued use of seller-funded down-payment assistance on FHA-backed loans.
Real estate industry trade groups are all but unanimous in their opposition to the Department of Housing and Urban Development’s proposed changes to the Real Estate Settlement Procedures Act, or RESPA.
HUD says its proposed changes to RESPA, unveiled in March, would save consumers $8.35 billion a year by helping them comparison-shop for a loan, title insurance and other settlement services. Industry groups say the changes will prove costly to implement and won’t help consumers as claimed.
At a May hearing before the House Committee on Small Business, the National Association of Realtors argued that HUD’s proposal to provide incentives for lenders to package settlement services like title insurance, appraisals and inspections would favor large lenders at the expense of small, locally based settlement service providers (see Inman News story).
In an Aug. 7 letter, 243 members of the House urged HUD to withdraw its RESPA rule changes and work with the Federal Reserve on simplified disclosure forms instead. HUD responded that while it’s willing to modify its proposal, it won’t withdraw it altogether (see story).
"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," HUD said in defense of the proposed changes. "The Department believes that a rule is needed to help consumers avoid such difficulties in the future."
The latest hearing on HUD’s proposed RESPA changes will be held Tuesday, Sept. 16, by the House Subcommittee on Oversight and Investigations, a subcommittee of the House Financial Services Committee.
Subcommittee chairman Rep. Mel Watt, D-N.C., issued a press release saying the hearing will build on the House Small Business Committee’s hearing in May and also "examine the impacts of HUD’s proposed RESPA reforms on consumers and other stakeholders in the mortgage settlement process."
Also scheduled for Tuesday is a markup session of HR 6694, a bill that would allow the Federal Housing Administration to continue to allow the use of seller-funded down-payment assistance on FHA-backed loans.
HUD maintains such assistance — often provided by home builders through nonprofit groups — artificially inflates home prices and increases the risk of default. A sweeping housing bill signed into law July 30, HR 3221 would end the practice on Oct. 1.
HR 6694 seeks to address criticism of seller-funded gifts by tying its use to borrowers’ credit scores. The bill, introduced the day after the passage of 3221, has been referred to the House Financial Services Committee that’s chaired by Rep. Barney Frank, D-Mass.
At a hearing on foreclosures in Stockton, Calif., last weekend, Frank said HR 6694 has HUD’s support because it would also allow the department to implement risk-based pricing on FHA insurance premiums — a practice that would otherwise be suspended for at least a year by HR 3221 (see story).
HUD has not confirmed that it will support HR 6694, which could be amended in Tuesday’s markup session before the bill is reported to the House for a vote.
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