What Homeowners and Buyers Needs to Know about Proposed RESPA Rules

RISMEDIA, June 13, 2008-The public comment period ended on Thursday, June 12, for the new proposed mortgage disclosure rules issued by the Department of Housing and Urban Development (HUD). The proposed rules will restructure mortgage disclosures under the Real Estate Settlement Procedures Act (RESPA).

“While we absolutely agree that the mortgage process needs to be reformed, HUD’s proposed rules are dangerous, costly and fail to achieve their stated goals of bringing clarity and transparency to the mortgage origination process,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers. The CMPS Institute has just completed an exhaustive review of the proposals, and they have sent their comments to HUD.

According to the CMPS, there are two major flaws in the rules that are addressed in CMPS’ comments:

Problem #1 - The proposed rules require mortgage banks and brokers to provide a preliminary “GFE application” and rate lock that is based on very limited preliminary information. “This is like asking a stock broker to prepare a Temporary Stock Quote and guarantee the validity of the quote while the investor takes a few days and shops among other stock brokers for a lower stock price,” said Nicholas. “This is totally unrealistic and impractical, and demonstrates that the proposed rules were written by government officials who obviously have little or no business experience or understanding of how the market works.”

Problem #2 – The proposed rules require only mortgage brokers to disclose the commissions they earn, while allowing bankers to slide by without disclosing their commissions. “This is totally unacceptable as bankers now originate more than 60% of home mortgages,” said Nicholas. This is up from a low point of only 35% a few years ago. “Mortgage brokers are already going out of business en masse by virtue of market conditions,” said Nicholas. “These rules would simply drive up their costs while giving bankers an unfair competitive advantage. This lack of competition in the marketplace will harm consumers.”

CMPS Institute included a sample Home Mortgage Summary Disclosure Form as their proposed alternative to HUD’s rules. “CMPS’ proposed disclosure form is simple, effective and easy to understand,” said Nicholas. “It levels the playing field between bankers and brokers, protects consumers and brings much needed clarity to the mortgage process.”

For more information, visit www.CMPSInstitute.org or call 888.608.9800.

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