Home / News / Government / Banking Groups Sound Off Against RESPA
Print This Post Print This Post

Banking Groups Sound Off Against RESPA

Eight banking groups led by the Mortgage Bankers Association (MBA) are calling for the government to throw out the new ""Real Estate Settlement Procedures Act"":http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm (RESPA), claiming that changes to the regulation are needed to ensure mortgage disclosures truly benefit borrowers.
In a ""joint letter"":http://www.mortgagebankers.org/files/AU/2009/JointLetter_RESPATILA_2-9-2009.pdf to the newly appointed Housing Secretary Shaun Donovan, the industry organizations wrote, ""While all of us have worked for many years to improve the mortgage disclosure process to better protect and empower consumers and we appreciate the efforts HUD has taken to date, we strongly believe that the rule should be withdrawn and coordinated with the ongoing reform effort of the Federal Reserve Board under the Truth in Lending Act (TILA).""
According to the letter, RESPA and TILA disclosures are complementary and should be designed to work together to ""achieve their common purpose of ensuring consumer understanding.""
The Fed has said that it is reviewing TILA disclosure requirements for both mortgages and home equity loans, and expects to propose a new rule soon. In light of this fact, the banking groups say, RESPA and TILA reform efforts should be combined.
The industry groups said, ""Considering that RESPA and TILA rules are so interrelated, successive disclosure changes, first by one agency and then the other, would be unnecessarily costly for the industry at a time when the industry can ill-afford the costs, and would confuse consumers rather than providing greater clarity.""
The ""final RESPA rule"":http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm was issued by the Department of Housing and Urban Development (HUD) in November, but does not take effect until January 1, 2010. The revised regulation is intended to improve disclosures in home loan financing by rewriting the good-faith estimate and providing stricter provisions for settlement services, such as title insurance. The banking groups argue that HUD should suspend or recall the rule because the agency has underestimated the problems that could result and overestimated the rule's benefits.
""The fact remains that consumers today confront a daunting array of disclosures that are disparate, uncoordinated, confusing and, consequently, too often ignored,"" the joint letter said. ""Given the new administration’s desire to review new and pending regulations, and to address problems in the marketplace, the administration has a unique opportunity to assure its new RESPA requirements do not exacerbate the problem and are an important part of the solution.""
In addition to MBA, signers of the letter to Donovan include the American Bankers Association, American Escrow Association, American Financial Services Association, Consumer Bankers Association, Consumer Mortgage Coalition, Housing Policy Council of the Financial Services Roundtable, and the Independent Community Bankers of America.
The National Association of Home Builders and the National Association of Mortgage Brokers have both taken legal action against HUD and its RESPA rule, suing over stipulations in the act that ban builders from giving home buyers discounts or incentives through an affiliated mortgage or title company. Their argument is scheduled to be presented to a U.S. district court judge on April 3rd.

About Author: Carrie Bay

Carrie Bay is a freelance writer for DS News and its sister publication MReport. She served as online editor for DSNews.com from 2008 through 2011. Prior to joining DS News and the Five Star organization, she managed public relations, marketing, and media relations initiatives for several B2B companies in the financial services, technology, and telecommunications industries. She also wrote for retail and nonprofit organizations upon graduating from Texas A&M University with degrees in journalism and English.

Check Also

Case Spotlights Potential Exploitation of Bankruptcy Process

A recent decision by a Kentucky Bankruptcy Court dismissed a debtor’s Chapter 13 case after several attempts to take advantage of the bankruptcy process.