RESPA Reform Under Fire From Realtors, ALTA
A hearing at the House Committee on Small Business on Thursday served as the latest platform for industry groups to voice their concerns over proposed changes to the Real Estate Settlement and Procedures Act, with representatives from both the National Association of Realtors and the American Land Title Association taking turns bashing the proposed reform measure as "confusing" and "costly" for consumers. The U.S. Department of Housing and Urban Development recently extended its comment period for the proposed reform measures, bowing to both Congressional as well as industry pressure. Comments on the proposed changes may be submitted through June 12. HUD's current reform proposal would expand its authority to enforce RESPA's provisions, and would force brokers to disclose any yield spread premium compensation upfront. "We believe that RESPA reform cannot be resolved in one sweeping change without considering and appreciating the many moving parts of a residential real estate transaction," ALTA president Gary Kermott said in testimony to key members of the House of Representatives. Among ALTA's concerns are changes to RESPA procedures that it argues will result in more confusion, red tape and cost for people both buying and selling a home. Kermott pointed to the imposition of responsibility on the closing agent to read and interpret the closing script on behalf of the borrowers as one such example of unneeded red tape, which he said "will increase costs for both sellers and borrowers." Adam Cockey Jr., chair of the National Association of Realtors' Real Estate Services Forum, was more blunt. He argued that the current reform proposal "tips the balance in favor of the largest financial industry players, opens the door to legal challenges, and does little if anything to benefit consumers." The NAR has called for the RESPA reform proposal to be withdrawn altogether.
Related links:No consumers, however, testified in front of the House panel. Others speaking at the hearing included HUD RESPA director Ivy Jackson; the Mortgage Banker Association's chairman-elect David Kittle; Marc Savitt, president-elect of the National Association of Mortgage Brokers; and Julia Gordon, policy counsel for the Center for Responsible Lending. Kittle's testimony focused on differences between HUD's RESPA proposal and efforts by officials at the Federal Reserve to reform Truth in Lending Act policies. "It is clear that there are considerable variations between the Board and HUD’s approaches to reform," Kittle said. One such example is how to handle disclosures of broker's fees; Kittle characterized the Fed's proposal in this area as "a clear agreement," while calling HUD's proposal within RESPA guidlienes as "far from direct." Kittle suggested that HUD officials work with officials at the Federal Reserve, rather than independently finalizing its own set of rules. Full video of the RESPA is available by clicking here.