HUD Reforms Would Improve Mortgage Process

May 5, 2003

The Honorable Mel Martinez

Secretary

U.S. Department of Housing and Urban Development

Robert C. Weaver Federal Building

451 Seventh Street, S.W.

Washington, D.C. 20410

Dear Mr. Secretary:

The last quarter-century has produced significant regulatory changes in the

transportation, communications and financial services sectors that have harnessed market

forces to produce substantial consumer benefits. We have before us another such

opportunity. This time it is to streamline a key regulatory structure that governs the real

estate sector.

The U.S. Department of Housing and Urban Development’s (HUD)

proposed rule to revise the nearly 30-year old Real Estate Settlement Procedures Act

(RESPA) to allow for greater competition in the market for home mortgage lending and settlement services will benefit consumers greatly without requiring additional government spending. We applaud your efforts and hope that you will move quickly to issue a final rule.

HUD’s proposal would strip away existing regulatory barriers and allow businesses in the real estate market to offer consumers volume discount pricing and guaranteed costs in advance of reaching the closing table. Through regulatory reform and greater competition, consumers stand to realize more than $10 billion, or nearly $1,000 per home

closing, in market efficiencies.

It is mind-boggling, but the current so-called consumer protection regulations contained in Section 8 of RESPA essentially prohibit both of these

market mechanisms that have been proven to be consumer-friendly. Today, prospective homebuyers receive nearly meaningless cost estimates and volumes of government-mandated disclosures.

Overly complex real estate closing regulations have intimidated consumers, diminished incentives to shop for lower prices or better

services, and lead to higher-than-necessary closing costs. Your efforts to simplify the regulatory process and provide consumers with greater certainty in the shopping process

will encourage growth within the real estate sector.

Further, HUD’s proposal to simplify government-mandated disclosure requirements will help to minimize frivolous lawsuits. The complexity of current requirements creates a

target rich environment for trial lawyers to bring baseless suits against well-meaning lenders and settlement service providers. Ultimately, this litigation increases the cost of

capital for consumers.

America has perhaps the finest real estate sector in the entire world, but there is still much that it can do to strengthen families and neighborhoods. Homeownership creates

wealth that can be passed from generation to generation, and teaches the values of private

property and investment. Government regulations that make it more difficult for Americans to own homes diminish the greatness of this nation, and these regulations should be changed regardless of whether a few businesses face greater competition as a result.

In your proposal, we have one more opportunity to prove that markets, not bureaucrats or government programs, provide consumers with the greatest protection and benefits.

Sincerely,

Paul Beckner

President

Citizens for a Sound Economy

John Berthoud

President

National Taxpayers Union

Tom Schatz

President

Citizens Against Government Waste

Jack Kemp

Co-Director

Empower America

Mary M. Martin

Chairman of the Board

and Executive Director

Seniors Coalition