Robert Freedman is the former director of multimedia communications at NAR.
HUD Push on RESPA
The current proposal is too rushed and too costly, experts say.
October 1, 2008
Sales are down, inventories are up, and real estate professionals are struggling to survive in what Adam Cockey of Chase Fitzgerald & Co. in Baltimore calls a "devastating" time for some practitioners.
Stepping into this volatile brew is the U.S. Department of Housing and Urban Development, with orders from the White House to quickly finalize Real Estate Settlement Procedures Act reforms that the National Association of REALTORS® and other real estate groups say are too complex and costly.
"Revision of HUD’s RESPA regulations are a high priority of the administration," Ivy Jackson, the director of HUD’s RESPA division, told the House Small Business Committee this spring.
HUD proposed the reforms earlier this year to make real estate transactions easier, cheaper, and more transparent to consumers, but critics say the results will be the opposite for several reasons:
- The proposed Good Faith Estimate is four times as long as the most common GFE issued today, and the categories used in the two documents don't correspond. The proposed form also fails to accomplish the changes to disclosure that Congress directed HUD and the Federal Reserve Board to cooperate on, a project never undertaken.
- The packaged-services provision favors discount pricing over quality service and skews the playing field in favor of the largest lenders.
- The required "closing script" for settlement officers comes too late in the transaction, opens title agents to new legal liability, and ignores accepted closing procedures in several states.
"Whoever wrote these rules doesn’t understand the real estate industry," says Chase Fitzgerald’s Cockey, who testified before the House panel earlier this year on behalf of NAR. Cockey chairs NAR's Real Estate Services Committee and sat on the association's RESPA presidential advisory group.
In early August, close to two-thirds of House lawmakers urged HUD Secretary Steve Preston to withdraw the rule and work with the Federal Reserve Board on a joint rulemaking effort.
Industry groups will have a chance to press for the joint rulemaking at a House Financial Services Subcommittee on Oversight and Investigations this fall. But they'll also be looking to the new administration to bring a fresh set of eyes to HUD's reform efforts.
In efforts to get HUD to reconsider the implications of its RESPA reform proposal, real estate industry groups have found powerful allies. In early August, close to two-thirds of House lawmakers urged HUD Secretary Steve Preston to withdraw the rule and work with the Federal Reserve Board on a joint rulemaking effort to simplify settlement cost disclosure forms.
"To expedite this process," the lawmakers say in a letter to Preston, "we ask that you discard hundreds of pages of the HUD-proposed RESPA rule" involving aspects of the reform that were never made available for public comment.