U.S. Housing and Urban Development (HUD) Secretary Shaun Donovan has announced his intention to implement the mortgage reforms under the Real Estate Settlement Procedures Act (RESPA) that are scheduled to take full effect on Jan. 1, 2010. For the first time in more than 30 years, HUD is updating mortgage rules to help consumers shop for the lowest cost mortgage, avoid costly and potentially harmful loan offers, and save an average of $700.
Meanwhile, HUD is withdrawing, and announcing its intent to propose revised language relating to, a narrow provision of the final RESPA rule that redefines a prohibited practice called 'required use' where consumers are steered toward higher cost mortgage services provided by affiliated businesses.
"This administration is committed to providing consumers with clear and transparent information when they make the biggest purchase of their lives," said Donovan. "We will implement the new RESPA rules as part broader reforms to the mortgage process. And after further consultation with the public, stakeholders and Congress we will propose a clearer and more effective "required use" definition that truly protects borrowers from those who force them to use affiliated businesses. Needed consumer protections are too important to allow confusion over one specific provision to hold up needed RESPA reforms."
On January 1, 2010, HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table. Closing agents will also be required to provide borrowers a new HUD-1 settlement statement that clearly compares consumers' final and estimated costs. By promoting comparison shopping, HUD's final RESPA regulation is estimated to save consumers an average of nearly $700.
Donovan indicated after a thorough review of more than 1,200 public comments, HUD will propose a new 'required use' definition to help consumers shop effectively and safely for homes and mortgages, free from the influence of disingenuous discounts and incentives that steer consumers to the use of affiliated businesses. In the interim, HUD's existing 'required use' definition will remain in effect.
To read the full text of HUD's notice to withdraw the 'required use' definition, click here.
For more information, visit www.hud.gov.