NAMB to file lawsuit over RESPA rule: Studies show final RESPA rule will hurt consumers and small businessesMortgagePress.comNAMB, RESPA, Baker and Hostetler LLP, Federal Policy Group, Marc Savitt, yield spread premium
The National Association of Mortgage Brokers (NAMB) filed a
lawsuit against the U.S. Department of Housing and Urban
Development (HUD) after it recently issued the Real Estate
Settlement Procedures Act (RESPA) Final Rule on Nov. 17, 2008.
NAMB, with the support of Baker & Hostetler LLP and the Federal
Policy Group, argues that the Final Rule is in violation of law,
finalized on a flawed consumer testing methodology, and will have a
detrimental impact on small businesses consequently having a
negative affect on consumers.
"HUD has failed to examine properly the Final Rule's impact on
small businesses," says Marc Savitt, NAMB President. "It will put
small business mortgage professionals at a significant competitive
disadvantage, impeding competition in the mortgage industry and
ultimately hurting consumers. What we are looking for is a level
playing field for consumers."
The lawsuit against HUD states that the Final Rule is "arbitrary
and capricious," contrary to the intent of Congress, and fails to
offer any rational reasons for its rejection of alternative
approaches. The Final Rule discriminates against mortgage brokers
with the required broker-only disclosure of yield spread premium
(YSP), placing them at a permanent disadvantage in the marketplace.
HUD has disregarded numerous federal and private sector studies
providing evidence that different origination channels disclosing
differently confuses consumers, and will often times cause them to
choose a more expensive mortgage product.
Consumer studies conducted by HUD failed to test both the
consumer understanding of loan terms and comparative shopping when
originator compensation was not disclosed, and disclosures in
transactions involving competing originators.
"Flawed testing methodology prevented HUD from adequately
assessing consumer understanding of provisions in the originally
Proposed Rule," says Savitt, "Consequently, issuing the Final Rule
on flawed and inaccurate conclusions."
"Reform of RESPA is necessary to accomplish a simplified
mortgage process," Savitt stated, "But implementing provisions
harmful to small businesses and consumers in doing so, is not the
For a copy of NAMB's comment letter submitted to HUD, click
For more information, visit www.namb.org.