HUD defends RESPA reform

August 22, 2002

109-page report details benefits of agency's proposal


Inman News Features

The mortgage process can be cumbersome, confusing and costly and is "plagued" with problems that can be remedied by revamping the Good Faith Estimate or packaging settlement services to cap fees and disclose total costs upfront, according to a report recently released by the U.S. Department of Housing and Urban Development.

The 109-page report, "Economic Analysis and Initial Regulatory Flexibility Analysis," argues that the current rules limit consumers' ability to comparison shop, impede competition among mortgage services providers, make it too difficult for consumers to identify major costs and junk fees, create confusion over what mortgage brokers do and how they get paid and provide no assurance that consumers receive the intended benefits of yield spread premiums.

The report details HUD's proposed rule to change the Real Estate Settlement Procedures Act and projects the impacts HUD thinks the changes could have on consumers and mortgage service providers.

The proposed rule would allow consumers and originators to choose between a simplified good faith estimate combined with "tolerances" on final costs and a new method of reporting yield spread premiums or a guaranteed-cost package of settlement services.

HUD projected that originators would gravitate towards the guaranteed cost approach. The housing agency's report said the only originators who would suffer would be those who overcharge uninformed buyers, are high-cost producers or benefit from what HUD views as the current system's restrictions on competition.

Copyright: Inman News Service


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