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Keep Your Pipeline Full

National Mortgage Professional
May 17, 2002

Industry Elite Propose Changes to Proposed RuleMortgagePress.comHUD, RESPA, Proposed Rule, NAMB, Mel Martinez, In what has turned from an intense, nationwide campaign into a hushed waiting game, the U.S. Department of Housing and Urban Development closed its Proposed Rule comment period mailboxes on Oct. 28, to the anxious anticipation of Mortgage Brokers everywhere. With more than 40,000 letters and postcards stuffing HUD's offices, the mortgage industry can most definitely be pleased with a job well done, though the outcome will remain questionable until HUD takes the next step. Along with individual brokers and brokerages, many mainstream mortgage corporations and professional trade associations weighed in their opinions with HUD during the 90-day comment period. In letters sent to Secretary Mel Martinez, several high-profile organizations used their clout in an attempt to impede the adoption of the current Real Estate Settlement Procedures Act proposal, of which The Mortgage Press has excerpted the most relevant: The National Association of Mortgage Brokers NAMB has had a long history of supporting the reform of the mortgage laws in our country ... [However] NAMB does not support the Proposed Rule's characterization of yield spread premiums as a "lender payment to the borrower," as it will limit consumers' choices, render Mortgage Brokers unable to compete with lenders, and fails to meet the definition as contained in [HUD's own] Statement of Policy 1999-1 and clarified in SOP 2001-1. As a small business, NAMB cannot support the concept of the packaging of settlement costs as defined in a regulatory setting. NAMB believes that packaging will lead to monopolies amongst the larger lenders, as small Mortgage Brokers and other small settlement providers will no longer be able to compete for consumers. The very volatility of the marketplace, especially in recent times, renders many of HUD's proposals in the Proposed Rule untenable, at best. The Mortgage Bankers Association of America For numerous reasons, HUD should delay the implementation of the revised Good Faith Estimate (GFE) proposals. As currently drafted, these proposals are extremely complex and, in our opinion, unnecessary in light of the extraordinary pro-consumer reforms advanced under the Guaranteed Mortgage Packaging (GMP) proposal. We are, therefore, asking that changes to the GFE be delayed until after the market has had an opportunity to accommodate the packaging reforms. After a reasonable period of implementation, HUD should revisit the need for any additional changes to the current system. Countrywide Home Loans Inc. Countrywide Home Loans would like to express its strong support for our professional Mortgage Broker business partners and emphasize the important part they play in the mortgage lending process. It is particularly important to recognize the role of Mortgage Brokers in the context of HUD's proposed RESPA reforms ... America's Mortgage Brokers play a crucial role in an industry that is vitally important to consumers and the U.S. economy in general. It is imperative that careful consideration be given to any proposal that might have the consequence, unintended though it may be, of interfering with this most important mortgage origination channel. The National Association of Realtors As for the GMP proposal, NAR feels that there is not evidence of consumer and industry benefit to move forward with this more radical approach to reform, at this time. There are inherent risks in this proposal, and until more is known about the likely impacts, HUD should postpone advancing this kind of significant regulatory change ... The real issue in the RESPA debate is Section 8, and whether the problems identified in the mortgage process can be addressed without removing this very important consumer protection. By providing Section 8 exemption to the GMP, HUD has created a powerful regulatory incentive that could move the industry to packaging with, or without efficiency gains. Most importantly, the kinds of changes being proposed by HUD should be more fully debated in Congress before HUD moves forward with any approach to reform. Wholesale Access What we find particularly disquieting is that, as a consumer, we still will not get the same GFE disclosure for the same mortgage at the same interest rate from a loan officer at a bank as from a loan officer at a mortgage brokerage. This means that we cannot price-compare, at least not accurately, among different originators. The proposal fails to close the disclosure gap that has existed for consumers since November 1992. What sense does this make? If implemented, HUD's proposal will create market distortions that are bad for consumers and brokers alike. Under it, brokers will always appear to have the higher price, because YSPs are treated as a credit to the borrower, while service release premiums (almost the mirror image) aren't disclosed by non-broker originators. That is like saying, if you pay us a dollar in dimes, we won't get taxed, but if you pay is in quarters, we will. It is disparate treatment, is it not? American Land Title Association We believe that the HUD proposed revisions to the RESPA regulations, particularly the GMP proposal, would have a very serious adverse effect on small businesses in our industry, and on their ability to compete for consumer business. Equally important, we believe that the proposals, if implemented in their present form, would effectively close the door to future entry into this industry by small businesses. The Federal Trade Commission HUD's general approach in these proposed changes is to require brokers and lenders to provide consumers with more information about the mortgage process, or to provide information in a revised format. FTC staff believes that this approach will greatly benefit consumers, but also urges HUD to consider carefully whether the information disclosed will be useful to consumers, and whether it is disclosed in an easily understood way. If the additional information or revised formats confuse consumers, the proposed changes may not increase consumer welfare as much as HUD intends and, in the worst case, actually result in consumer harm ... Finally, the new disclosure applies to only one sector of the mortgage market-Mortgage Brokers. HUD's Economic Analysis itself indicates that the mortgage origination market is highly competitive, including the Mortgage Broker section. It is unclear, therefore, whether and how the new disclosure would lead to a more competitive playing field, or why the significant transfer from brokers to consumers estimated by HUD would occur.
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