MBA chair-elect Kittle testifies on RESPA reformMortgagePress.comMBA, David Kittle, RESPA, House Committee on Small Business, RESPA and Its Impact on Small Business
David G. Kittle, CMB, chairman-elect of the Mortgage Bankers
Association and president of Principle Wholesale Lending Inc. of
Louisville, Ky. testified before the House Committee on Small
Business. At the hearing titled, "The Real Estate Settlement
Procedures Act (RESPA) and Its Impact on Small Business", Mr.
Kittle told the committee that it is crucial that any new RESPA
rule eliminate confusion and simplify the mortgage process for
consumers while not causing undue hardship for small
Below is Mr. Kittle's oral testimony, as prepared for
"Madame Chairwoman, Ranking Member Chabot, thank you for the
opportunity to appear before you. As a mortgage banker and a small
businessman, I am pleased to discuss the changes HUD has proposed
to the RESPA regulations.
Since HUD last issued a RESPA rule in 2004, the real estate
market has experienced an unprecedented crisis, resulting in severe
hardship for consumers and businesses alike. This crisis has many
causes and victims. The causes range from economic conditions, to
real estate prices to outsized investor and borrower appetites.
The victims include borrowers, but more than that, future
borrowers, communities and the economy at large. While MBA does not
believe that the lack of transparency in the mortgage process is
the main cause of borrower difficulties, or that its improvement is
the only solution, greater transparency could help stem abuses.
The sheer volume and complexity of disclosures today allows
abusers to hide in plain sight. Long before the current market
crisis, MBA supported simplification and greater financial
literacy. MBA believes that problems in the industry are a good
reason to redouble efforts in both of these areas.
Greater transparency would better empower consumers to make
smart choices, based on their own individual needs. It would also
empower borrowers to compare their initial loan offers to the final
costs of the loan, which will help protect against abuse.
In today's market, people shop more effectively for a new flat
screen tv than they do for a mortgage. We all need to do a better
job to encourage increased shopping by consumers and clearer loan
The forms that borrowers confront today include the Truth in
Lending disclosures, which detail the costs of credit, and the Good
Faith Estimate and HUD-1, both of which detail settlement costs.
These forms are required under TILA and RESPA.
Consumers need to get a clearer, simpler set of forms than
these. So any changes to TILA forms, which are the Federal
Reserve's responsibility, and the RESPA forms, which are HUD's,
should happen together. Otherwise, additional costs associated with
implementing new forms and procedures will fall on consumers and
small businesses. In other words, reform should happen
comprehensively, rather than piece-meal.
HUD has issued its rule and the Federal Reserve has announced
that it will work on a new TILA rule. HUD and the Fed should work
together on these reforms. If they are unable to do that, at the
very least, HUD should delay the implementation of its rules until
the Fed implements its TILA changes. Most importantly, the
disclosures must work together. It makes no sense to have TILA, GFE
and HUD-1 forms that don't.
While we have many issues that are detailed in our testimony,
actually improving transparency is the most important. The HUD-1
and the GFE should work hand in hand. If nothing else, failing to
ensure that they do will be a missed opportunity that will result
in continued confusion among consumers.
While simplification of the mortgage process is a high priority
for the MBA, we do not believe improvements should unduly harm
small businesses. We believe that small businesses operate
effectively in all aspects of the mortgage process and should
continue to do so.
The rule as proposed by HUD will have significant effects on
both small and large businesses.
The effects of the proposed rule would include one-time and
ongoing costs of the new rules, including increased time and money
spent at closing and possibly increased legal liability for
everyone involved. My written statement goes into further detail on
The Mortgage Bankers Association supports efforts to make the
mortgage process simpler, clearer and more transparent for
consumers. Doing so will empower consumers and help fight predatory
The RESPA Rule released by HUD is not simplification. Consumers
need a full reform of the disclosures they see, including both
RESPA and TILA that helps them quickly and effectively navigate the
Public policy should help ensure that the problems we see in the
market today do not happen again. Reforming the mortgage process is
an important but difficult task. It is imperative that we get this
One more quick point: I appreciate the five minutes you have
given me. Just imagine if I had to read the entire closing script
that HUD proposes. It would have taken me nine times as long as
this statement took me to read."
Mr. Kittle's full written testimony can be found at www.mortgagebankers.org.