Mortgage lenders will continue to support reform of the mortgage application and settlement process, according to six trade groups, provided the Department of Housing and Urban Development allows lenders to offer guaranteed mortgage packages without itemizing costs.
In a letter to HUD, the industry associations point out that the GMP proposal would reduce settlement costs by allowing volume discounts, average cost pricing and other pricing structures currently inhibited by the Real Estate Settlement Procedures Act.
"With a few refinements, the GMP option can thrive in the marketplace," the April 30 letter to HUD says.
Under HUD's GMP proposal, lenders could guarantee settlement costs, as well as the interest rate, without itemizing costs.
However, Senate Banking Committee chairman Richard Shelby, R-Ala., has been pressing HUD to require itemization.
But the lender groups claim itemizing the cost of individual services at the time of application is not practical and the disclosure would come too late in the process to help consumers comparison shop.
It would "effectively eviscerate the GMP" and "prevent the GMP from becoming a reality in the marketplace," the trade groups say in the letter.
The American Bankers Association, American Financial Services Association, America's Community Bankers, Consumer Bankers Association, Consumer Mortgage Coalition and Mortgage Bankers Association signed the April 30 letter.
The letter sends a strong message at a time when most participants in the debate over RESPA are getting edgy - because no one seems to know where HUD is going with its reform proposal. And the lenders want to make sure HUD knows where they stand.
"We are gravely concerned that the department might undertake to revise the good faith estimate (disclosure) as part of a final rule, while delaying or forgoing any efforts to allow GMPs. Such a move would have severe consequences," the trade groups warn.
They also are concerned that HUD is reviewing newly "fleshed out" proposals for a two-package approach, advocated by the American Land Title Association and the Real Estate Services Providers Council (RESPRO). The two-package approach would create a lender's package that would include origination fees, appraisals, credit reports and flood certifications that are required by the lender, and a settlement services package would include title services, recordation fees, pest inspections and other fees.
Meanwhile, lender groups are also concerned about the consumer groups and their lackluster support for Real Estate Settlement Procedures Act reform.
"All they care about is predatory lending," one trade official said.
To bolster the reform effort, the lenders have solicited support from conservative interest groups, such as former HUD secretary Jack Kemp's Empower America, the National Taxpayers Union and Citizens Against Government Waste. These groups are urging secretary Martinez to move ahead with RESPA reform, despite warnings from key Republicans, such as Sen. Shelby, that HUD should slow down and reissue the proposal (with revisions) for another round of comments.
"We applaud your efforts and hope that you will move quickly to issue a final rule," according to the joint letter to HUD secretary Martinez. The Seniors Coalition and Citizens for a Sound Economy also signed the letter.
"HUD's proposed rule to revise the nearly 30-year-old Real Estate Settlement Procedures Act to allow for greater competition in the market for home mortgage lending and settlement services will benefit consumers greatly without additional government spending," the letter says.
In a separate letter, Americans for Tax Reform also expressed support for HUD's effort to simplify the regulatory process and increase competition in the real estate market.