Posted on 03/22/2004 7:53:55 PM PST by Dems_R_Losers
Revised Rules on Mortgages Are Scuttled
By JENNIFER BAYOT
The rules on closing home loans are evidently so knotty that a federal agency yesterday withdrew a proposal to overhaul them because of opposition from both the mortgage industry and consumer groups.
The Department of Housing and Urban Development said its plan required additional vetting and would be made available for public scrutiny at some unspecified time.
"Once we get those comments, we can better decide the best approach for the re-proposal of this rule," Alphonso Jackson, the department's acting secretary, said yesterday in a conference call. "The most prudent thing at this time is to withdraw the rule."
When it was first proposed in July 2002, the rule required lenders either to offer a single price for the various costs of processing the mortgage - including such expenses as appraisals and title insurance - or to stick much more closely to initial estimates of those costs.
The agency estimated that the measure would save homebuyers $700 each on their loans, or $8 billion a year - more than a sixth of the $50 billion that HUD says Americans spend a year in closing costs.
But the contents of the revised rule are unknown: rather than seeking another round of public comment, HUD submitted the rule to the Office of Management and Budget in December for final approval. The budget office would have to release the measure for it to be made public.
Congress's displeasure with the agency's action has delayed the appointment of Mr. Jackson, the White House's nominee for secretary. At confirmation hearings last month, Senator Wayne Allard, Republican of Colorado and the chairman of the housing subcommittee, accused HUD of "thumbing its nose at Congress" by pressing ahead with the rule. This month, 226 members of Congress signed a letter criticizing HUD and urging the Bush administration to force the agency to release the revision.
Senator Allard said yesterday, "If you're going to be head of HUD, you need to learn to listen to the Congress and listen to what they're hearing from their constituencies." He said the original rule would have concentrated too much market power among the biggest mortgage lenders.
President Bush has spoken several times in favor of HUD's proposal, most notably in December during a bill signing at the agency just hours before the rule revision was submitted.
"We have proposed new rules to make it easier for buyers to shop around and to compare prices on closing costs, so they can get the best deal and the best service possible," he said.
But the White House has also announced two other ambitious housing initiatives, one to assist low-income home buyers with down payments and another to raise home ownership among minority groups.
"I think they would rather see success on those other initiatives," said Kurt Pfotenhauer, senior vice president for government affairs at the Mortgage Bankers Association. The administration "needs a spearhead to get those initiatives through Congress and would probably rather not risk them by tying up their designee for HUD secretary in a controversial rulemaking."
Mr. Jackson said the delay in his appointment had nothing to do with the agency's decision to withdraw its proposal. He said that the measure was still alive. "We are strongly committed to simplifying, improving and lowering the cost of obtaining a home mortgage," he said.
But consumer advocates said the measure seemed unlikely to reappear. "I think what you heard was Washington-speak for, 'O.K., we're done,' " said Ira Rheingold, executive director of the National Association of Consumer Advocates. "I think this has caused a lot of pain and suffering at HUD, and I don't think they want to live through it again."
He said that the mortgage industry's response to the original proposal was enormous. "The noise this thing generated was really unbelievable, and it was because it affected the industry's pocketbook," Mr. Rheingold said. "I think HUD was kind of overwhelmed."
Still, withdrawing the rule is preferable to passing a version too similar to the original, said Margot Saunders, managing attorney of the National Consumer Law Center.
"We are not disappointed," she said, "because we were very concerned that the rule as originally proposed would have facilitated predatory lending" by obscuring the components of a loan.
Mr. Jackson declined yesterday to give details on the revised rule the agency submitted in December or to say what another revision might look like.
But a letter sent yesterday by the Office of Management and Budget to Mr. Jackson, and published on HUD's Web site, expressed some specific concerns.
Citing a study released last month by the Federal Trade Commission, the letter said that a new mortgage document proposed by the rule could actually confuse consumers and steer them to costlier loans.
The letter also suggested that HUD "further refine its analysis of the rule's impact on specific origination and settlement service industries." Several mortgage groups have said that overhauling too many parts of the rule, the Real Estate Settlement and Procedures Act, could hurt the country's robust housing market.
Mortgage bankers and brokers yesterday cheered the revised rule's withdrawal but said they still welcomed attempts to improve mortgage closings.
"There need to be some reforms, there is no doubt," said A. W. Pickel III, a mortgage broker in Lenexa, Kan., and president of the National Association of Mortgage Brokers. "But the proposal that we saw created an unlevel playing field for mortgage brokers as opposed to mortgage bankers."
Mr. Pfotenhauer of the Mortgage Bankers Association said, "We remain supportive of the goal of mortgage simplification."
Ms. Saunders said that consumer groups would like to see HUD re-propose the rule rather than let its ambitions fade. "We would prefer that they come out with something meaningful," she said. "But we're not hopeful."
I have been to a lot of closing. I have never been to one where the buyer didn't know how much he was going to pay.
In TX the State sets the price of Title Ins.
Maybe it's an obsolete version; it seeks to limit Big Stupid Government, not enable it.
I have been in about 10 sales/purchases of homes and have never been ripped off. Estimates were always VERY close if not exact.
How come. We refi'd a few months ago and had no problem.
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