MBA: HUD and Federal Reserve Must Work Together on RESPA Reform

As a critical comment period for proposed reform to the Real Estate Settlement and Procedures Act by the U.S. Department of Housing and Urban Development expires today, the Mortgage Bankers Association on Thursday weighed in with a stern warning for HUD officials: work with the Fed on updating the Truth in Lending Act in conjunction with RESPA, or risk hopelessly bungling both. MBA president and CEO Jonathan L. Kempner said that while the trade organization “applauded” HUD for its effort to re-define RESPA criteria, updating the Act needed to be part of a larger effort to simplify the overall origination process for consumers. “Recent events demonstrate that borrowers also need additional clarity about the terms and cost of credit,which falls under the Fed’s responsibility under TILA,” said Kempner. “For that reason, we strongly believe that HUD should link its efforts with the Board of Governors of the Federal Reserve so that both agencies work together in a careful, coordinated and comprehensive manner to truly simplify and improve the mortgage process for consumers.” Specifically, the MBA said it wants to see HUD and Fed officials produce a combined TILA and good-faith-estimate (GFE) form to replace current disclosures given to borrowers.

“The Board has already issued proposed new rules under TILA and the Home Ownership and Equity Protection Act (HOEPA) concerning the mortgage market generally and is expected to soon embark on further reform efforts concerning TILA disclosures specifically,” wrote Kempner in a letter to HUD officials. “HUD’s efforts should be linked to the Board’s efforts.” While the MBA is pushing for a collaborative reform approach, HUD’s efforts to reform RESPA have come under much stronger fire from the National Association of Realtors and the American Land Title Association. “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 during a recent hearing at the House Committee on Small Business. 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 NAR Real Estate Services Forum, argued in testimony to the same House panel 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.

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