WASHINGTON (3/17/08)--The Department of Housing and Urban Development (HUD) has released a new Real Estate Settlement Procedures Act (RESPA) overhaul plan to simplify and improve the disclosure requirements for mortgage settlement costs under the law. HUD has worked for years to develop its proposal. The new proposal, which appeared in the March 14 Federal Register
is the result of public comment on a 2002 plan, HUD RESPA Reform Roundtables in 2004, congressional hearings, consultation with other federal agencies, and more. HUD says its objective in proposing the revisions is to protect consumers from unnecessarily high settlement costs. The plan includes steps to:
* Improve and standardize the Good Faith Estimate (GFE) form, to make it easier to use for shopping among settlement service providers; * Ensure that page one of the GFE provides a clear summary of the loan terms and total settlement charges so that borrowers will be able to use the GFE to comparison shop among loan originators for a mortgage loan; * Facilitate the borrowers' ability to compare the GFE they get at loan application with the HUD-1/Settlement statement that they get at closing; * Provide more accurate estimates of costs of settlement services shown on the GFE; * Improve disclosure of yield spread premiums to help borrowers understand how they can affect their settlement charges; * Ensure that at settlement borrowers are made aware of final loan terms and settlement costs, by reading and providing a copy of a ``closing script'' to borrowers; * Clarify HUD's current regulations concerning discounts; and expressly state when RESPA permits certain pricing mechanisms that benefit consumers, including average cost pricing and discounts, including volume based discounts.
Comments are due May 13. This RESPA plan does not include an earlier proposal that would have permitted lenders to offer guaranteed mortgage packages, which would give a guaranteed lump sum price for settlement costs, along with a guaranteed rate. The Credit Union National Association (CUNA) participated extensively in the development proves of the HUD proposal and opposed the guaranteed mortgage packages. CUNA submitted two extensive comment letters, in 2002 and then in 2005, and participated in the Reform Roundtables, by HUD’s invitation. However, another major concern CUNA noted with the earlier proposal is that it expands the GFE from one to four pages, which CUNA argued is inconsistent with HUD's goal of simplifying the RESPA disclosures. The GFE in the new proposal is also four pages, so CUNA continues to question whether element of the new plan represents any improvement. HUD has also indicated It intends to seek legislative changes to RESPA to complement these regulatory changes, which includes strengthening certain statutory disclosure requirements and improving remedies for violations.