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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.