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CUNA Regulatory Comment Call

July 22, 2005

• The Department of Housing and Urban (HUD) is renewing efforts to amend the requirements under the Real Estate Settlement Procedures Act (RESPA) in order to improve the mortgage process and to lower settlement costs for borrowers.
• This effort began in 2002 with a proposed rule, which was later withdrawn, as a result of opposition from CUNA and others. HUD is now in the process of developing a new proposed rule to address the concerns that were raised in response to the earlier proposal.
• HUD’s current goal with regard to RESPA reform is to create a new format for the Good Faith Estimate (GFE) form to ensure that the information is easier to understand and that the estimates are more accurate and delivered in a more timely manner. This also includes improved disclosures in connection with yield spread premiums, which include lender payments to loan brokers in order to pay for settlement costs that are then recovered from the borrower in the form of a higher interest rate.
• HUD also wants to encourage the development of mortgage packaging that will provide a guaranteed, lump sum price for all loan originator and government-required settlement costs associated with obtaining a mortgage, along with a guaranteed interest rate.
• CUNA recently met with HUD to discuss the latest effort to reform RESPA. At the meeting, HUD shared with the participants its latest version of the revised GFE and mortgage packaging forms, along with other issues. These forms were developed by HUD in 2004 in response to comments received at the time that the 2002 proposed rule was issued. At the meeting, HUD indicated that it is interested in receiving preliminary comments on these forms and other issues prior to issuing a proposed rule, which is expected later this year. Below are links to HUD’s latest version of the proposed GFE and mortgage packaging forms:
  
  Good Faith Estimate of Settlement Costs (GFE)
  
  Mortgage Package Offer (MPO)
• See the first link below for more information about HUD’s previous proposal to reform RESPA. The second link is CUNA’s comment letter in response to this earlier proposal.
  
  Proposed RESPA Rules
  
  Real Estate Settlement Procedures Act (RESPA)
• Please submit your comments to CUNA by September 1, 2005. Please feel free to fax your responses to CUNA at 202-638-7052; e-mail them to Senior Vice President and Associate General Counsel Mary Dunn at mdunn@cuna.com and to Senior Assistant General Counsel Jeffrey Bloch at jbloch@cuna.com; or mail them to Mary and Jeff in c/o CUNA’s Regulatory Advocacy Department, 601 Pennsylvania Avenue, NW, South Building, Suite 600, Washington, DC 20004-2601. You may also contact us at 800-356-9655, ext. 6032, if you would like a copy of HUD’s latest version of the proposed GFE and mortgage packaging forms or any other information related to HUD’s latest efforts to reform RESPA.

• What changes, if any, should be made to either the current or HUD’s latest proposed version of the GFE to make it more helpful to consumers and the industry? Is HUD’s latest version of the GFE easier to understand than the versions that are currently being used by the industry?
  
  

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• How should loan originator compensation be disclosed on the GFE?
  
  

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• What may be the impact on consumers of a mortgage package that includes an interest rate guarantee and a fixed price for settlement costs?
  
  

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• In a new proposed rule, HUD may propose that anyone in the industry should be able to offer a “subpackage,” which would be a guaranteed price for some, but not all of, the settlement charges. How can subpackaging be designed to maximize competition without creating undue complexity for consumers?
  
  

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• Should high-cost loans that are covered under the Home Ownership and Equity Protection Act (HOEPA) be eligible for packaging?
  
  

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• Should there be an opportunity to cure and/or provide remedies for errors or violations of mortgage packaging or GFE requirements?
  
  

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• This latest version of both the GFE and mortgage package form includes a new section that compares the loan with loans containing different rates and settlement charges. Do you support including this type of information? The latest version also contains a Mortgage Shopping Chart that consumers can fill out to compare different loan offers. Will this be helpful to consumers, especially if they compare different types of loans, such as comparing fixed rate loans with adjustable rate loans?
  
  

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• HUD’s latest version of the GFE requires that the sum of certain charges cannot exceed the amount on the GFE by more than 10%. This includes: 1) required services that the lender selects; 2) title services and lender’s title insurance if the lender selects the providers or the borrower uses the providers referred by the lender; and 3) required services that the borrower can shop for if the borrower uses providers referred by the lender. This differs from the 2002 proposal, which would have required that each such charge not exceed 10%, as opposed to the sum of the charges not exceeding 10%. Is this latest approach acceptable or should these types of restrictions be opposed since lenders cannot control these types of costs?
  
  

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• The revised GFE and mortgage package form indicate that the offer will be open for borrower acceptance for a minimum of 10 days from when the document is delivered or mailed to the borrower, which has been reduced from a 30-day period that was proposed in 2002. Is this expiration date appropriate?
  
  

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• Over the last few years, the industry has developed mortgage packaging approaches without the need for regulatory changes. Should this innovation continue before HUD issues a proposed rule in this area?
  
  

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• Other comments?
  
  

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