Effort to Continue Abuse of Homeowners Stopped

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RISMEDIA, Sept. 2, 2008-Last week, the American Homeowners Grassroots Alliance (AHGA) thanked the Department of Housing and Urban Development (HUD) for standing by its decision to reform the Real Estate Settlement Procedures Act (RESPA). RESPA governs many mortgage lending and related practices. Home ownership in the U.S. is declining due to the rapid growth of foreclosures caused by unethical industry practices. Mortgage lending and other real estate service sector lobbying groups have sought to stop the reforms.

HUD’s proposed changes to RESPA will stop many of the practices that contributed to the current housing crisis. The changes will save consumers over $8 billion a year by helping them shop for the best mortgage loans, title insurance and other settlement services. The new regulations will also protect consumers from overcharges, and promote competition between mortgage lenders and settlement services providers.

The proposal has been developed over many years with input from all stakeholders. The rule language has been consumer tested, and consumer organizations overwhelmingly support the changes. So do many responsible professionals in the mortgage lending and other real estate services sectors, as evidenced by their many supportive postings on industry blogs.

As AHGA pointed out in its June 12, 2008 comments to HUD on the proposed RESPA regulation, the fact that between five and six million American homeowners are currently at risk of foreclosure makes it clear that a large share of homeowners lacked full awareness of the risks of certain types of mortgages before agreeing to their terms. The heartbreaking stories that AHGA has heard from many of its members revealed that many of them didn’t fully understand the potential of many mortgage terms to cause problems in the future, and many claim to have been unaware of those provisions at all.

The evidence is clear that the irresponsible actions of various segments of the real estate services community are largely responsible for the housing crisis we now face. Those actions have destroyed the dreams of millions of homeowners and are requiring large federal bailouts from American homeowners and other taxpayers. Many major corporations and trade associations in the mortgage lending and other real estate services sectors have opposed legislative initiatives to reform the regulation of real estate services, and have consistently opposed HUD’s proposed changes to RESPA as well.

At the request of those major real estate sector corporations and trade associations, a number of U.S. Representatives recently asked HUD to withdraw the proposed RESPA changes. AHGA believes that those legislators have been misinformed by industry lobbyists about the impact of the proposed RESPA regulations on American homeowners. AHGA is also disappointed that many of these legislators may not fully appreciate the widespread consumer outrage over the efforts by major real estate sector corporations and trade associations to preserve the unfair and unethical lending and other practices that lead us into the current housing crisis.

AHGA believes that HUD’s response to the legislators was fair and balanced. HUD declined to withdraw the proposed regulations, as it should have since the regulation will provide major new protections and other benefits to consumers. By comparison, the points made in the legislator’s letter (pdf) were either incorrect, of minor significance, and/or overstated. HUD noted that it would continue to consider all comments, and make appropriate modifications and improvements to the rule as it moves forward to implementation.

That will also give HUD the opportunity to reconsider recommendations from AHGA and many other consumer organizations on ways that the regulations can be made stronger. “Mortgage lending and other real estate services industry lobbying organizations have the right to continue to try to stall new regulations that would take away their ability to mislead and deceive American homeowners. As HUD reviews those businesses recommendations, it should compare them to the suggestions of organizations whose primary objective is protecting American homeowners, and implement the recommendations that best protect consumers.” observed AHGA President Bruce Hahn.

AHGA believes that the major real estate sector corporations and trade associations now need to stop whining and refocus on sound and ethical business practices in order to regain the trust of American homeowners. For these reasons AHGA commends HUD for refusing to bow to their lobbying pressures, and for HUD’s commitment to go forward with the implementation of the new RESPA regulations.

The American Homeowners Grassroots Alliance is a nonprofit consumer advocacy organization dedicated to assisting homeowners better understand the significant economic issues affecting their home and their lifestyle, and empowering them to make their voices heard by state and federal officials.

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