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- This effort began in 2002 with a proposed rule, which was later withdrawn, as a result of opposition from CUNA and others.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.
- HUDs 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 HUDs 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 HUDs previous proposal to reform
RESPA. The second link is CUNAs 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 firstname.lastname@example.org and to Senior Assistant General Counsel Jeffrey Bloch at email@example.com; or mail them to Mary and Jeff in c/o CUNAs 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 HUDs latest version of the proposed GFE and mortgage packaging forms or any other information related to HUDs latest efforts to reform RESPA.
QUESTIONS TO CONSIDER REGARDING RESPA REFORM
(HUD HAS REQUESTED RESPONSES TO MOST OF THE FOLLOWING QUESTIONS)
- What changes, if any, should be made to either the current or HUDs latest
proposed version of the GFE to make it more helpful to consumers and the industry?
Is HUDs latest version of the GFE easier to understand than the versions that are
currently being used by the industry?
- How should loan originator compensation be disclosed on the GFE?
- What may be the impact on consumers of a mortgage package that includes an interest
rate guarantee and a fixed price for settlement costs?
- 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?
- Should high-cost loans that are covered under the Home Ownership and Equity Protection
Act (HOEPA) be eligible for packaging?
- Should there be an opportunity to cure and/or provide remedies for errors or violations
of mortgage packaging or GFE requirements?
- 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?
- HUDs 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 lenders 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?
- 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?
- 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?
- Other comments?
Eric Richard General Counsel (202) 508-6742 firstname.lastname@example.org |
Mary Mitchell Dunn SVP & Associate General Counsel (202) 508-6736 email@example.com
Jeffrey Bloch Assistant General Counsel (202) 508-6732 firstname.lastname@example.org
Lilly Thomas Assistant General Counsel (202) 508-6733 email@example.com
Catherine Orr Senior Regulatory Counsel (202) 508-6743 firstname.lastname@example.org