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Groups' Support for RESPA Change Hinges on GMP

BY Brian Collins
05/28/2003
by Brian Collins on 5/28/03.

WASHINGTON -- 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.