Understanding the RESPA Proposed Rule
 

by David, David@MortgageMag.com

The Primary Laws Which Regulate the Mortgage Industry are:

• Real Estate Settlement Procedures Act (RESPA) Prohibits cost-increasing abusive practices such as kickbacks and referral fees and requires advance disclosure of settlement service costs.
• Truth-in-Lending (TILA) - Requires disclosure of the cost of credit to the consumer and the terms of repayment.
• Equal Credit Opportunity Act (ECOA) - Prohibits discrimination in lending.
  Fair Credit Reporting Act (FCRA) - Stipulates the requirements of users of credit reports and disclosure to consumer.
• State Licensing - Forty-five states currently have state licensing requirements for mortgage brokers in addition to ten federal laws and supplemental regulations

On July 5, 2002, HUD submitted to Congress a draft of its Proposed Rule to reform the Real Estate Settlement Procedures Act ("RESPA").  This proposed rule has been controversial and the source of a great deal of debate and comment. 

This update is designed to provide both a quick read to understand the proposed rule and make available sources for deeper study and understanding. 

Contents:

• Section 1:  What the RESPA Proposed Rule is all About

• Section 2:  Latest News about the RESPA Proposed Rule

• Section 3:  Analysis, Clarification & Opinion of the Proposed Rule

• Section 4:  Training for RESPA Compliance 

• Section 5:  Take Action in the RESPA Proposed Rule Debate 

Section 1:  What the RESPA Proposed Rule is all About

Getting to know the Current RESPA
If you are new to RESPA, your first step may be familiarize yourself with it, as it is currently written.  HUD has a very good site that provides a wealth of information on RESPA and the disclosure requirements.  Go to  the  HUD RESPA Info Site

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RESPA Proposed Rule
This is the place to get fully primed on HUD's RESPA Proposed Rule.  Here, we provide the basic summary of the changes, while providing avenues for further information. Here is the Proposed Rule in as much detail as you want:

• Basic Summary:  In an effort to simplify the mortgage process and to provide certainty to borrowers about their costs, HUD's proposal would change the mortgage disclosure process by requiring lenders to disclose mortgage loan costs (interest rate and settlement costs) in one of two ways:

1. Improved Good Faith Estimate (GFE): Establishes a new format for GFE and requires firmer price quotes. Lender origination charges, lender required services, and government charges must be firm. Other lender required but shoppable third party services will be subject to an upper limit, or 10% "tolerance".

        or,

2. Guaranteed Mortgage Package (GMP). Lender discloses the loan rate and a single guaranteed price for a package of settlement services. For example, 7% int. and $3000 GMP. Lenders, or packagers offering this option will be exempt from Section 8* (the prohibition against kickbacks). This exemption would only apply to the services within the package. The current prohibition against referral fees between lenders, real estate licensees and other providers will be maintained.
   (Under this approach, borrowers will no longer have a choice in the selection of their providers. Instead they will choose lump sum packages)
   
   *Under today's rules, a lender is prohibited from charging a borrower more for a third party settlement service than it cost the lender. The proposed rule would eliminate this prohibition and permit the lender to make a profit on the service as long as the service is part of a GMP.

• More Detail and Background of the Proposed Rule:   
  From MBAA (Mortgage Bankers Assoc. of America- See More
  From NAR (National Assoc. of Realtors)- See More
• Most Detail- Actual HUD RESPA Proposed Rule document:  See More

Q&A- Questions & Answers about the Proposed Rule:  Good tool by Realtor.Org  See More

HUD testimony before Congress:  By Mel Martinez, Secretary of HUD  See More

RESPA Website Searches- for more information: 

HUD Website  See More
NAMB Website  See More
MBAA Website  See More

Section 2:  Latest News about the RESPA Proposed Rule

ALTA, American Land Title Assoc, is one of the best news outlets for the RESPA reform.  It is updated regularly. This page provides a historical sequence of news items related to the Proposed Rule.  For recent news items, See More
For a more historical news listing, See More

MBA, Mortgage Brokers of America, provides a good listing of general mortgage news, See More

HUD's Economic Analysis of Proposed Rule
Analysis of the impact paints a good picture of the Proposed Rule.  See More

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HUD Clarifications
Realtor. COM has a valuable list of clarifications from HUD over the Proposed Rule.  This search will put up other information related to RESPA, as well.  See More

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Opinions & Responses on the Proposed Rule
The new RESPA Proposed Rule has generated a great deal of comment and opinion.  In general, most comments have not endorsed the new measure.  In fact, nearly all comments have suggested the Proposed Rule be delayed for further discussion and amendments.  Many believe this delay is now in place.  Below, ALTA is sourced for their comprehensive list of industry comments related to the RESPA Proposed Rule.  Also, a detailed listing for NAMB, MBA and NAR is provided in this section.

Comprehensive Comment List- ALTA, American Land Title Assoc, provides a lengthy list of many organizations that have filed comments with HUD regarding the Proposed Rule.  See More

NAMB Comments- National Assoc. of Mortgage Brokers has provide much opinion on this rule:

• NAMB Responds to HUD's Proposed RESPA Reform- Press release dated June 27, 2002.  See More
   
• NAMB Position on HUD Proposed Rule- Outcome of Meeting with HUD on September 26, 2002.  "The National Association of Mortgage Brokers (NAMB) has long supported the reform of the Real Estate Settlement Procedures Act (RESPA), and other federal mortgage lending laws. As a result of this long history, NAMB continues its support of mortgage reform by supporting Secretary Martinez's efforts to simplify the mortgage settlement process for consumers. However, NAMB is concerned that some of the provisions of the proposed rule reforming Regulation X and the disclosure of settlement service costs will have unintended consequences for both consumers and industry as well as be unworkable in today's world.
  
  While this continues to be a work in progress, (here) are some of the issues NAMB has identified in connection with the proposed rule. NAMB looks forward to working with HUD to find workable solutions to these and other issues."  See More
   
• NAMB HUD Comment Letter- On October 28, NAMB staffers hand delivered a 43-page comment letter signed by President Armand Cosenza to HUD offices in Washington, DC. This is NAMB's official position on HUD's proposed rule for RESPA reform.  See More
   
• NAMB List of Government Actions & Comments- comprehensive list of NAMB comments and actions on a variety of topics, where the most recent focus mainly on RESPA.  See More
   
• Testimony before the Senate Committee on Banking, Housing and Urban Affairs- Statement of Joseph L. Falk, CMC, CRMS on behalf of National Association of Mortgage Brokers before the Senate Committee on Banking, Housing and Urban Affairs, January 8, 2002.  See More

MBA Comments- Mortgage Brokers Assoc. of America has had much to say about the Proposed Rule:

• Comment Letter to HUD- Letter detailing opinions and suggestions.  See More
   
• Testimony before Senate Banking Committee- Statement of John Courson, President & CEO, Central Pacific Mortgage Company, Folsom, California, on behalf of Mortgage Bankers Association of America before the Senate Banking Committee U.S. Senate Hearing on Abusive Uses of Yield Spread Premiums, January 8, 2002.  See More
   
• Statement of Rep. John J. LaFalce- Before the Housing Financial Services Committee Hearing on HUD Rule on RESPA Reform.  See More
   
• Blueprint for Change- MBA has designed an opinion for mortgage industry reform on several topics.  See More
   

NAR Comments- National Association of Realtors has put in a considerable effort to respond to the Proposed Rule:

• NAR Urges Further Review- NAR found a fair amount of common ground with the GFE (Good Faith Estimate), but suggested the Guaranteed Mortgage Package needed further review.  See More
   
• NAR Website RESPA Search- Comprehensive list of comments and actions related to RESPA.  See More

RESPA training is available through many outlets.  However, there will be no training available for the Proposed Rule changes until this reform is passed.  Here are a few training sources.  Also check into MortgageMag's Multimedia Report for more training options.

NAMB Training- See More

MBA CampusMBA-  See More

Google Search for RESPA Training-  See More

If you are interested in joining in on the Proposed Rule debate, ALTA has a generally well-planned packet for you.

ALTO Action Packet- American Land Title Assoc.  See More

Have a comment?  We welcome your comments, suggestions or additions to this site.  Please email us at david@mortgagemag.com

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