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

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.

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