ALERT Alert 10/12/02 - SAMPLE DRAFT LETTER TO HUD ON YOUR COMPANY’S LETTERHEAD
|October 12, 2002|
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SAMPLE DRAFT LETTER TO HUD ON YOUR COMPANY’S LETTERHEAD
Rules Docket Clerk
Office of General Counsel
Department of Housing and Urban Development
451 Seventh Street, S.W.
Washington, D.C. 20410-0500
RE: Proposed Rule on Real Estate Settlement Procedures Act (RESPA); Simplifying and Improving the Process of Obtaining Mortgages To Reduce Settlement Costs to Consumers; Docket No. FR-4727-P-01; 67 Fed. Reg. 49134 (July 29, 2002)
Dear Sir or Madam:
The proposed revisions to the RESPA regulations, while well intentioned, will adversely affect buyers and sellers in residential real estate transactions, undermine competition for title and related settlement service business, and threaten the survival of thousands of small, independent businesses that provide such ser-vices at the local level. My company supports the views expressed by the American Land Title Association in its submission to HUD dated October 4, and wants to emphasize certain key concerns about the HUD proposals.
[ADD PARAGRAPH BRIEFLY DESCRIBING YOUR COMPANY AND ITS SERVICES. IF YOU ARE A SMALL BUSINESS, PLEASE EMPHASIZE THAT FACT AS HUD IS REQUIRED UNDER FEDERAL LAW TO GIVE SPECIAL CONSIDERATION TO THE IMPACT OF THEIR PROPOSALS ON SMALL BUSINESSES.]
Services that meet the lenders needs do not meet the consumer’s needs. The proposal confuses lender needs and consumer needs. Both the packaging proposal and the revised Good Faith Estimate proposal assume that whatever title and settlement services and providers meet the lender’s needs will also meet the consumer’s needs. This is certainly not the case in transactions involving the purchase/sale of property. Purchasers and sellers frequently select different services than lenders would require.
Smaller businesses such as ours will find it impossible to compete and survive in this environment. The title and settlement services industry has traditionally been an industry in which there have been few barriers to entry by small businesses and in which small businesses have thrived. This is due in part to the local nature of our business and to the fact that we are also a highly service-oriented business where meet-ing the needs of local customers has been an important factor, in addition to having competitive fees. HUD’s packaging proposal would tilt the competitive playing field in favor big companies who may be in a position to offer the greatest discounts or benefits to lenders.
The proposed rule has an adverse Impact on the Industry and Small Business. HUD’s packaging pro-posal would make it difficult, if not impossible, for title companies and other settlement service providers to compete directly for the consumer’s business and would force us to offer discounts and kickbacks to lenders in order to get into their packages. By requiring that all costs – including the loan, the lender-related charges, and all other settlement services – be included in a single package price, HUD has given lenders control over the selection and pricing of all other services. There is no need for this in order to meet HUD’s basic objectives and ALTA’s submission offers an alternative – lenders packaging lender’s charges, and anyone being able to package the title and other settlement-related charges – that HUD should seriously consider.
(ALTA Member: If you live in a seller pay jurisdiction please provide information on the way that transaction works.) The packaging proposal erroneously assumes that the purchaser pays for all settlement costs, which is not the case in many markets around the country. In many areas, the seller pays for title insurance. This prac-tice evolved historically because sellers of real property conveyed marketable title. Providing title insurance was an easy way to do this. The HUD proposals, by not requiring the lender to disclose specific information about these services and the amounts in the Good Faith Estimate and the Guaranteed Mortgage Package price that are attributable to these services, will tend to discourage such seller-pay practices, to the detriment of borrowers.
The proposal could conflict with our state law. HUD’s proposed exemption for packaging from RESPA Sec. 8 will encourage pricing practices and/or payments to mortgage lenders that will be in conflict with in-surance law and regulations in our state that are designed to protect insurance consumers. State law regu-lates title insurance in order to assure that there are sufficient financial resources to cover claims and that the insurance product is appropriately priced.
I appreciate HUD’s consideration of these views and of the more extensive views and alternative approaches suggested in the ALTA filing on the proposed rule.