SOURCE: RESPRO

June 16, 2008 12:15 ET

RESPRO® Urges HUD to Publish a More Targeted RESPA Rule

WASHINGTON, DC--(Marketwire - June 16, 2008) - The Real Estate Services Providers Council, Inc. (RESPRO®) has urged the Department of Housing and Urban Development (HUD) to publish a targeted Real Estate Settlement Procedures Act (RESPA) rule that simplifies the Good Faith Estimate (GFE) without disrupting the residential housing market.

RESPRO® also encouraged HUD to work more closely with the Federal Reserve Board (Fed) to assure that providers of mortgage and other settlement services are not subject to overlapping and potentially conflicting federal requirements during the application, underwriting and approval processes.

RESPRO®'s request was made in its comments on HUD's March 2008 proposed RESPA rule, which would revamp the application and closing process for residential mortgage loans.

RESPRO® pointed out that many of HUD's initiatives in its proposed rule had not been aired to the public before and could potentially increase costs and delay closings. "Given the fragility of today's housing and credit markets and the introduction of broad-reaching proposals that have not been previously raised, RESPRO® believes the Department should issue a more targeted rule that creates a simplified GFE that is more comparable to the HUD-1 Settlement Statement and more consistent with other federal laws," RESPRO® Executive Director Sue Johnson said in the comments.

RESPRO® particularly objected to HUD's proposal to restrict companies such as real estate brokers and homebuilders from offering consumers incentives if they use their affiliated mortgage and title services in order to assure a prompt and efficient closing.

If a mortgage or title service problem arises that could potentially delay a closing, "a homebuilder or real estate broker is better able to use its affiliated settlement service businesses to resolve those issues in an expedient manner better than an unaffiliated company with which it has no previous relationship," RESPRO® stated.

Commonly-offered incentives for using a company's one-stop shopping services are a buy down of closing costs or interest rate, downpayment assistance, or a discount on the mortgage origination fee, RESPRO® said. Many real estate brokers also offer service guarantees if the consumer uses their affiliated mortgage and title companies to close the transaction. These programs can promise customers who use a real estate broker's mortgage and title services that it will pay the difference if closing costs on the HUD-1 Settlement Statement exceed those on the Good Faith Estimate, deliver the title commitment within ten business days from the date it receives the title order, deliver the HUD-1 Settlement Statement five days prior to settlement, and pay $500 if closing occurs later than the date mutually agreed upon.

If HUD's rule is adopted as proposed and these incentives cannot be offered, "consumers will lose access to tangible benefits that they value, and real estate brokers and homebuilders would lose a beneficial tool to assure that their customers are able to close the transaction efficiently," RESPRO® said.

RESPRO® also urged HUD to reconsider its proposal to require closing agents to prepare and read a script at closings, which it said will significantly increase the length and costs of closings.

The Real Estate Services Providers Council, Inc. (RESPRO®) is a national, non-profit trade association of real estate broker-owners, mortgage lenders, title insurers and agencies, home builders, and other settlement service providers who support the offering of convenient, innovative and cost-effective services to consumers through affiliated businesses and strategic alliances across the home buying industry. For more information about RESPRO®, see www.respro.org.

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