Reforms to federal real estate rules underway
|March 17, 2005|
RESPA reforms in progress, official says
By Janis Mara
Reforms to the federal act governing real estate referrals and practices are underway and will be submitted to Congress for input within two months by the U.S. Secretary of Housing and Urban Development.
The Federal Real Estate Settlement Procedures Act, or RESPA for short, has been in the spotlight as nationwide investigations over alleged title insurance kickbacks developed in recent weeks. The act regulates referrals and other practices in the industry.
"We will be coming to you within the next 60 days to get your input, and the input of the ranking members, as to what is the best approach" with regard to RESPA reform, HUD Secretary Alphonso Jackson told the House Financial Services Committee at a hearing earlier this month.
Calls for reform have arisen amid investigations of title companies for alleged kickback scams in Colorado, California, Florida and at least seven other states over the last few weeks. In the alleged schemes, title insurance companies overcharge home buyers for title insurance, then split the fees with developers, home builders and real estate agents who sent the business their way.
Rep. Michael Oxley asked Jackson about RESPA reform at a March 2 hearing, saying there's "clearly a need for drastic reform" in the closing process. Oxley commented on the complexity of the real estate closing process, saying, "Anything we can do to simplify it and to make it more transparent, and to have kind of apples-to-apples comparisons on costs would be incredibly important for the consumer."
HUD's previous attempts to make changes to RESPA to simplify the home buying process for consumers came to a halt in March 2004 when Jackson withdrew the agency's proposal from the White House Office of Management and Budget. At that time, Jackson said HUD would reexamine the rule, revise it if necessary and re-propose it.
This time, HUD will seek input from members of Congress before releasing proposals for public comment.
"Once we get (Congress') input, we will go back to the industry, and let the industry group make their comments…I can assure you that once that is done, we will not hold (the rule) in abatement as we did last time," Jackson said in response to Oxley.
At the March 2 hearing, Jackson told the Financial Services Committee HUD had been analyzing the rule.
"We have been doing some analysis over the last 90 days," Jackson said.
"My basic belief is, if we can get a consensus of 75 (percent) to 80 percent of the people in the industry and your consensus," it will be possible to get a rule "that will pass and address the needs of making sure that the closing cost is resolved very early," Jackson told the committee.
The original changes, proposed nearly three years ago, netted an unprecedented 45,000 comments during the public comment portion in 2002. Many of those came from within the real estate industry in opposition to the changes.
The original proposal would have changed the disclosure requirements for mortgage broker fees, including the controversial yield spread premiums, simplify the good faith estimate form and permit the sale of guaranteed-price bundled packages of mortgages and mortgage-related services. The changes aimed to make it easier for home buyers to understand the closing process.
Copyright 2005 Inman News