MBA's Kittle testifies on HUD's RESPA ruleMortgagePress.comHUD, RESPA, consumer, MBA
David G. Kittle, CMB, chairman-elect of the Mortgage Bankers
Association (MBA) and president of Principle Wholesale Lending Inc.
of Louisville, Ky. testified recently before the House Financial
Services Committee's Subcommittee on Oversight and Investigation.
At the hearing titled, "HUD's Proposed Real Estate Settlement
Procedures Act (RESPA) Reform," Kittle reiterated MBA's support for
RESPA reform and encouraged HUD to work with the Federal Reserve to
truly improve consumer disclosures that would allow borrowers to
better shop and understand their loan.
"Chairman Watt, Ranking Member Miller, thank you for the
opportunity to appear before you to discuss RESPA - one of the
Mortgage Bankers Association's top policy issues. I would like to
make three points and then I would be happy to answer any
One: MBA and I, personally, are firmly committed to improving
the mortgage process for both industry and consumers, and we have
been for a very long time.
Two: any reforms should give consumers the information they need
to effectively shop for loans, to inform themselves about the true
cost of closing on a mortgage and to protect themselves from
unscrupulous actors in the mortgage process. That requires a
comprehensive approach to the loan application and closing process,
involving both HUD's RESPA forms as well as the Federal Reserve's
Three: HUD's proposed RESPA reforms do not even come close to
achieving simplification. They should be delayed and officials at
HUD should work with the Federal Reserve on a joint and
comprehensive effort to simplify and improve forms and
Improving the mortgage closing and application process will
result in better informed customers who understand their loans and
the loan closing process. With greater transparency and better
information, consumers will shop more effectively. This will lead
to better mortgage decisions, and those lenders who can objectively
provide the best products for their customers will be the companies
that get the most business. The market will become more efficient;
lenders will have better and happier customers. Reform is right for
the market and for consumers.
But reform for reform's sake would be quite damaging to the
system. Reforms should achieve two inter-related goals:
"One: help consumers shop and "Two: help them understand their
loan and the closing terms better.
That's why it is imperative that HUD not work in isolation on
this issue, but work with the Federal Reserve in helping consumers
shop for and understand their loan. The Fed is responsible for the
rules implementing the Truth in Lending Act, or TILA. HUD is
responsible for RESPA. At the time of application, borrowers
receive a TILA disclosure and a "Good Faith Estimate" of closing
costs. In the middle of the process, recently passed federal law
mandates another TILA disclosure. Then at the closing table, the
borrower gets yet another document, the HUD-1, which is different
from the previous two documents. All of these documents are
ultimately confusing for the consumer. You simply can't compare one
document to another without a map. It is so confusing, HUD
literally has created a map between its two documents. How is this
Real simplification would look at all of the documents and
harmonize them so that they work together. Incredibly, this HUD
RESPA proposal would actually make the forms less similar. This is
exactly what consumers do not need. If you've purchased a home, you
have some idea of how the closing process works. Does anybody
really believe that the way to fix the closing mess is to make a
closing longer and to give more paper to customers?
What HUD has proposed would:
"Take what should be a one page form and make it four pages;
"Require a 45 minute script be read to the consumer, stretching an
already long closing process, with no benefit to the
"Continue to have a series of forms where the lines don't match up
and consumers can't figure out what happens from one part of the
process to the next.
MBA has long supported efforts to make the mortgage process
simpler, clearer and more transparent for consumers. Common sense
dictates that HUD and the Fed work together. The rules and forms
should be harmonious, work for borrowers and be implemented at the
same time to avoid confusion and unnecessary costs for lenders,
sellers and buyers.
In closing, let me say that we all know that the context of this
hearing is the larger situation in the mortgage and financial
markets. As you know, right now the market is fragile. This is not
the time to ask the industry or consumers to assume the costs of
regulatory changes unless they are necessary and well
We need reform. But we have to make sure we get the reform
right. We are pleased that HUD attempted a very difficult task.
They deserve to be commended for their efforts. Unfortunately,
HUD's efforts will not give consumers what they need.
Kittle's full written testimony can be found at www.mortgagebankers.org.