MBA Applauds HUD for Proposed RESPA Rule, Cautions About Potential for Consumer Confusion
Mar 14, 2008
WASHINGTON, D.C. (March 14, 2008) – Kieran P. Quinn, CMB, Chairman of the Mortgage Bankers today praised the U.S. Department of Housing and Urban Development (HUD) for releasing a new proposed rule to simply and improve the process of obtaining a mortgage under the Real Estate Settlement Procedures Act (RESPA).
“I want to applaud Secretary Jackson and the staff at HUD for the time and thoughtfulness they put into what is a very comprehensive and well intentioned proposed rule,” said Quinn. “MBA has been saying for a long time that the loan origination and closing processes can be daunting and confusing for many consumers and that providing more clarity and transparency would serve consumers well.”
According to MBA’s analysis the proposed rule would:
• Require a new, standard good faith estimate (GFE) that would disclose loan details (loan amount, term, interest rate, initial payment, rate lock period, whether payments can increase, prepayment penalty and whether or not there is an escrow for taxes and insurance). The GFE would also contain costs in ten categories and advise the borrower of the relationship between interest rate and settlement costs;
• Provide tolerances outside which the charges contained in the GFE could not increase;
• Provide a disclosure of mortgage broker fees;
• Modify the HUD-1 form to better correspond to the GFE;
• Provide a new script to be read and provided to the borrower at settlement;
• Permit disclosure of average cost pricing and negotiated discounts;
• Strengthen the prohibition against requiring the use of affiliates;
• Provide HUD with new enforcement authority.
“We would caution that this proposed rule, in combination with Federal Reserve’s ongoing efforts to revise disclosures under the Truth in Lending Act, has the potential to add significant paperwork to the loan origination process,” continued Quinn. “We encourage officials at HUD to coordinate with the Federal Reserve to ensure that any new mortgage disclosures actually simplify the process for consumers.”
MBA will do a comprehensive analysis of the proposed rule and will provide substantive comments to HUD by its deadline of May 13, 2008
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