REALTOR® Magazine-Daily News-No One's Happy With RESPA Rules

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Daily Real Estate News | November 8, 2008 | No One's Happy With RESPA Rules
There’s almost universal agreement on the new RESPA rules that the U.S. Department of Housing and Urban Development could issue as soon as next week—everyone hates them.

Consumer advocacy groups, real estate service providers, REALTORS®, and more 240 Congressmen have expressed opposition, said RESPA Philip Schulman of law firm K& L Gates, Washington, D.C.

“HUD’s stated goal was to increase transparency for consumers and simplify the closing process; Instead it made the proposed regulations exclusive and controversial,” said Schulman, who was part of a panel on RESPA at Friday’s real Estate Services Forum.

With the markets in trouble, “there couldn’t be a worse time to expect real estate service providers to spend money on new systems and training,” he said.

HUD’s proposed rules, which will go into effect Jan. 1, would expand the Good Faith Estimate of closing costs to four pages and set three categories of costs—each with a difference tolerance of change from the originally quoted cost.

Other controversial provisions include requirements that yield spread premiums, which lenders pay to mortgage brokers, are disclosed on the GFE; and that closing agents read aloud a lengthy script that explains differences between the GFE and the final HUD-1 settlement. “Not only will this add at least 45 minutes to each closing, but it puts closing agents in the position of practicing law as they try to explain mortgage terms and variations in costs,” said Schulman.

Another member of the panel, Anne C. Canfield of the Consumer Mortgage Coalition, said her organization developed its own proposed loan package that includes a loan shopping tool for consumers and closing statement that combines Good Faith Estimate and the Truth in Lending Act disclosures.

NAR and organizations representing real estate service providers must spend the year until implementation working to alter—or at least sidetrack—the new regulations, said Kenneth Trepeta, NAR director of real estate services.

—Mariwyn Evans