NAMB RESPA call to action: Send your letter to HUD today!MortgagePress.comNAMB, call to action, RESPA, RESPA reform, HUD
The Department of Housing and Urban Development (HUD) recently
proposed amending the Real Estate Settlement Procedures Act to
simplify and improve the process of obtaining mortgages and reduce
consumer settlement costs.
Among other things, the proposed HUD Rule would revise and
standardize the Good Faith Estimate form (GFE), modify the HUD-1
Uniform Settlement Statement (HUD-1), impose additional disclosure
requirements, require recitation of a "closing script" to
borrowers, and clarify instructions as to how applicable forms are
to be completed.
In regards to broker compensation disclosures, the proposed HUD
Rule makes distinctions among mortgage originators with no basis
for doing so, and in disregard of market realities. HUD has taken
this position even though exhaustive studies of mortgage
disclosures by the Federal Trade Commission show that additional
disclosures of mortgage broker compensation created confusion,
caused consumers to choose more expensive loans, led to a bias
against broker-assisted transactions, and impeded competition, thus
Please submit your personalized comments to HUD today!
Comments must be submitted by Tuesday, May 13. Please submit
your comments through the Federal eRulemaking Portal at www.regulations.gov.
Be sure to identify "Docket No. FR5180P01" in the subject line of
NAMB has provided the talking points below to help you formulate
your letter. Please use the talking points in conjunction with your
real-life experiences. For example, highlight real-life practical
considerations about how mortgage markets work and how brokers
conduct their business.
Please share this letter and talking points with others in the
George Hanzimanolis, CRMS
RESPA CALL-TO-ACTION TALKING POINTS
In today's mortgage market there is little difference between
mortgage brokers and mortgage bankers.
a. The distinctions between brokers and lenders have blurred in
recent years as lenders themselves typically package and resell
loans they originate.
b. Consumers are largely unable to distinguish between brokers
and lenders, which have similar names, use similar signage, and
rely on similar advertising.
c. Consumers should not have to figure out these differences
because everyone is competing directly.
d. Automation has also helped to blur the distinctions between
brokers and lenders. Most of the industry uses the same computer
software, so the reality is that the difference between a broker
transactions and a lender transaction is merely a key stroke on a
e. If applicable and you are doing both broker and lender
transactions please elaborate on how you are able to function in
this manner. Discuss how you can act in multiple capacities and how
it can be confusing to consumers because you can do both, yet the
disclosures are different.
Requiring broker transactions, but not other loan originator
transactions, to make compensation disclosures on the Good Faith
Estimate (GFE) inhibits competition, is unfair to small business
mortgage brokers, limits consumer choice, confuses consumers,
increases prices, and hurts borrowers.
a. Exhaustive studies of mortgage disclosures by the Federal
Trade Commission, the governments principal consumer protection
agency, in 2004 and 2007 show that additional disclosures of
mortgage broker compensation created confusion, caused consumers to
choose more expensive loans, led to a bias against broker-assisted
transactions, and impeded competition, thus hurting consumers.
b. In order to promote comparison shopping there should be a
corresponding requirement for lenders to disclose compensation paid
to their own sales staff. Fees similar to the YSP are present in
any mortgage origination distribution channel, regardless of
whether a broker is involved.
c. Requiring brokers, but not other loan originators, to make
compensation disclosures enables the brokers competitors to steer
consumers away from brokers, even if brokers offer more favorable
The proposed GFE form misleads consumers by perpetuating the
fallacy that through a lender a zero-point/zero-cost loan is free
to the consumer. The GFE should treat all originator transactions
NAMB supports making the GFE form mandatory. However even with
this necessary change, the proposed GFE continues to make a
distinction between broker transactions and lender transactions,
which as stated above hurts borrowers.
a. The four-page disclosure does not promote simplification and
clarity for consumers.
b. The GFE should look like the HUD-1. The proposed changes to
reorganize the HUD-1 with numbers and names that correspond to the
GFE is a step in the right direction, but not enough to aid
c. The period during which the GFE terms are available to the
borrower (10 business days) is too long. This will delay contracts
and drive-up costs for consumers.
NAMB supports the change in the definition of required use. The
new definition still allows for package bundling (an optional
combination of bona fide settlement services at a discount rate);
so long as consumers receive a better deal then if they purchased
settlement services separately.
a. However, we need to avoid any brightline test that sets a
dollar amount higher than zero as a threshold for determining what
constitutes an economic "any thing of value." HUD should not
consider the RESPRO bright-line test, which sets a dollar amount
threshold for determining economic incentives/disincentives.
As proposed, the current GFE will allow loan officers at lenders
to continue to sell against mortgage brokers by pointing out YSP
and not disclosing that they too receive indirect compensation.
Should HUD implement the proposed GFE, this practice by lender loan
officers should be considered by rule as a deceptive trade
practice. The FTC should have enforcement authority to prevent this
For more information, visit www.namb.org.