ALTA® Responds to Consumer Group Concerns on RESPA

August 8, 2003

WASHINGTON, Aug. 8 -- The American Land Title Association (ALTA) sent a letter today to HUD Secretary Mel Martinez responding to concerns that surfaced this week from consumer groups over the two-package settlement services approach proposed by ALTA. ALTA proposed the two-package approach as an alternative to HUD's proposed recommendations for reform of RESPA. The two-package approach would actually give consumers more choice in the settlement process than HUD's original proposal.

In the letter, James R. Maher, ALTA Executive Vice President, said, "The fundamental problem with the points made by the consumer groups is that they assume that the only transaction covered by RESPA is the mortgage loan transaction between the lender and the borrower and that all settlement services covered by RESPA are services needed by mortgage lenders to make mortgage loans. Whatever merit this position may have in the refinance context, it is incorrect in the context of transactions between sellers and buyers of residential real estate. Sellers and buyer have needs for title and closing services in order to effectuate the purchase transaction that are independent of the needs the lender may have in connection with its mortgage loan."

"In most areas of the country, the seller pays for a significant portion of the title and closing/escrow services involved in the purchase/sale transaction and is entitled to a voice in which providers will provide these services," the letter continued. ALTA's proposed two-package approach would take this into account, unlike HUD's original proposal in which the lender would choose all of the providers for the buyer, leaving the seller out of the equation.

Under HUD's packaging regime, mortgage lenders would determine which real estate settlement service providers would participate as part of their packages. This system would, in turn, minimize the disclosure requirements to consumers regarding the costs of the package contents. This could lead to consumers paying for a package that does not include the services they need, or force them to use providers selected by the lender rather than of their own choosing.

ALTA believes that HUD's proposal should focus on better disclosure of the various settlement costs so that consumers are fully advised of all fees going into the settlement transaction, rather than on permitting large mortgage lenders to control the process without disclosing their fees charged to consumers and the monies received from settlement providers.

ALTA believes this can be accomplished by adopting a two-package approach. Under this approach, lenders would offer, at a guaranteed price, a package of loan and loan-related services needed by the lender for its loan underwriting purposes. Title companies, real estate brokers, mortgage lenders and others would offer a guaranteed settlement services package of title and closing- related services without an exemption from Section 8 of REPSA. Any savings achieved in the guaranteed settlement package would be passed on to the consumer.

To read ALTA's letter to Secretary Martinez and more about the two-package approach, visit the RESPA Update section of ALTA's Web site at:

The American Land Title Association represents title insurance companies and their agencies nationwide on a variety of industry and legislative issues. Members of the Association search and insure land titles to protect real estate investors including home buyers and mortgage lenders.

Contact ALTA at 202-296-3671 or

North American Title Insurance Company (NATIC) is a seasoned title insurance underwriter, helping title agents to achieve their individual business goals for more than 50 years. Today, the company conducts real estate settlement services in 39 states and the District of Columbia through a network of experienced, independent agents.