Groups’ Support for RESPA Change Hinges on GMP

WASHINGTON — Mortgage lenders will continue to support reform of the

mortgage application and settlement process, according to six trade


provided the Department of Housing and Urban Development allows lenders


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,


cost pricing and other pricing structures currently inhibited by the


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


as the interest rate, without itemizing costs.

However, Senate Banking Committee chairman Richard Shelby, R-Ala., has


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


a reality in the marketplace,” the trade groups say in the letter.

The American Bankers Association, American Financial Services


America’s Community Bankers, Consumer Bankers Association, Consumer


Coalition and Mortgage Bankers Association signed the April 30 letter.

The letter sends a strong message at a time when most participants in


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


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


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”


for a two-package approach, advocated by the American Land Title


and the Real Estate Services Providers Council (RESPRO). The two-package

approach would create a lender’s package that would include origination


appraisals, credit reports and flood certifications that are required by


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


their lackluster support for Real Estate Settlement Procedures Act


“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


America, the National Taxpayers Union and Citizens Against Government


These groups are urging secretary Martinez to move ahead with RESPA


despite warnings from key Republicans, such as Sen. Shelby, that HUD


slow down and reissue the proposal (with revisions) for another round of


“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.


Seniors Coalition and Citizens for a Sound Economy also signed the


“HUD’s proposed rule to revise the nearly 30-year-old Real Estate


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


HUD’s effort to simplify the regulatory process and increase competition


the real estate market.