ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release October 29, 2002 #02-53
E-mail: [email protected]

AMERICA’S COMMUNITY BANKERS GENERALLY SUPPORTS PROPOSED CHANGES TO RESPA REGULATION

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WASHINGTON, D.C. — America’s Community Bankers generally supports revision of the Real Estate Settlement Procedures Act regulation proposed by the Department of Housing and Urban Development. But the trade group said it has reservations about the practical application of the proposed changes.

In its comment letter, ACB said that while it supports HUD’s efforts to modernize the mortgage origination process, HUD should amend the proposal and “move cautiously to a final rule so that the market can absorb the changes without lapses in compliance and the ever present threat of litigation. We urge HUD to work with industry participants to develop a rule that preserves the best features of a successful mortgage finance system.”

ACB said that HUD must divide the proposal into more manageable pieces, so that the changes can be tested and refined. ACB urged HUD to first implement the concept of the guaranteed mortgage package (GMP) of settlement services and the concept of requiring mortgage brokers to disclose their total compensation, including yield spread premiums received from the lender.

ACB strongly urged HUD to reconsider making any changes to the good faith estimate (GFE) at this time, and to repropose revisions after taking industry comments into account. “We strongly believe that the current good faith estimate must remain an option for those lenders who do not wish to package or are unable to do so,” ACB said.

“If the guaranteed mortgage package succeeds, it will be because the market is ready for such an option and it is found to be a meaningful shopping tool by consumers,” ACB said. “The only fair way to determine if it will work is to try the alternative, while allowing lenders who do not wish to package to use the current mortgage origination process.”

“We strongly urge HUD to move ahead to complete and implement the package option,” ACB said. “However, changes to the GFE should be postponed and reexamined at a later date. We suggest that making both changes at the same time would create undue stress on the mortgage markets.”

ACB said it had concerns about whether HUD has the legal authority to finalize some of the changes proposed to the GFE. In addition, ACB said the proposed GFE “raises a host of compliance and operational difficulties that require significant review and revision.” The proposal would require the GFE to be valid for a minimum of 30 days; lenders would be prohibited from imposing settlement charges exceeding 10 percent of the major charges listed on the GFE; and redisclosure would be required when the borrower requests a change in mortgage terms.

A transition period of several years would be required if any of the major elements of the proposal were adopted in final form, ACB said. While supporting implementation of a guaranteed mortgage package, ACB said a phase-in period would be necessary so that state law conflicts and other issues can be resolved.

In other comments, ACB said HUD must work with the other regulatory agencies, especially the Federal Reserve, which administers the Truth in Lending Act rules, to ensure that consumer protection laws are met and do not conflict with other requirements.

ACB said any new forms must be tested with consumers to ensure that they are understandable, and the testing effort should include a strong emphasis on financial literacy, and a transition period.

ACB said HUD must explicitly declare that the secondary market companies are not permitted to package mortgage settlement services — a function of the primary market.

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

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