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Revised Rules on Mortgages Scuttled
The New York Times ^ | March 23, 2004 | Jennifer Bayot

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."


TOPICS: Business/Economy; Extended News; Government; News/Current Events
KEYWORDS: bushcaves; ripoffs; specialinterests
This is an incredible cave-in by the Bush Administration. You can look forward to continuing to pay rip-off prices for title insurance, closings, and other loan related services, and forget about knowing how much you are actually going to pay before you get to the closing table. The Realtors and mortgage bankers have killed this reform to protect their profits.
1 posted on 03/22/2004 7:53:56 PM PST by Dems_R_Losers
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To: Dems_R_Losers
It needed to be killed IMO.
2 posted on 03/22/2004 7:56:22 PM PST by Dubya (Jesus saith unto him, I am the way, the truth, and the life: no man cometh unto the Father,but by me)
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To: Dems_R_Losers
forget about knowing how much you are actually going to pay before you get to the closing table

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.

3 posted on 03/22/2004 7:59:28 PM PST by Dubya (Jesus saith unto him, I am the way, the truth, and the life: no man cometh unto the Father,but by me)
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To: Dubya
Just closed refi in October in California--not even close on the estimate
4 posted on 03/22/2004 8:14:55 PM PST by kmiller1k (remain calm)
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To: kmiller1k
I guess its diff in each state. How can someone close and not know the price. In TX we have to bring cashier checks in the exact amount before we close.
Also when I am the buyer and/or the Real Estate broker I get a copy of the closing statement about 2 days before closing. However I already know how much I will owe as I am the one who made the deal with the seller, lender and the closing Co.
5 posted on 03/22/2004 8:30:03 PM PST by Dubya (Jesus saith unto him, I am the way, the truth, and the life: no man cometh unto the Father,but by me)
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To: All
HUD Withdraws RESPA Rule, Remains Committed to Reform

(March 22, 2004) -- The NATIONAL ASSOCIATION OF REALTORS® is applauding a U.S. Department of Housing and Urban Development announcement today that the department is withdrawing its draft final rule on changes to the Real Estate Settlement Procedures Act (RESPA).

In a March 22 letter to the Office of Management and Budget, which was reviewing the final rule, HUD Acting Secretary Alphonso Jackson said he was withdrawing the rule "due to the significant number of questions raised."

Jackson said in the letter that he was acting on the concerns of members of Congress, industry groups, and consumers. In fact, more than 250 members of Congress—Democrats and Republicans—had objected to HUD's decision in December to put forth a final rule for OMB review.

HUD has first proposed significant changes to RESPA two years ago, with the aim of creating an incentive for providers to offer packaged services. NAR had stridently opposed the changes on the grounds that they would have given an advantage to lenders in the packaging of settlement services without a clear benefit to consumers.

"Congress acted to fulfill its responsibility to review the proposed regulation and ensure that it met the test of congressional intent," said NAR President Walt McDonald in a statement released by NAR today. "More and more decisions affecting millions of homeowners are being made at the regulatory level today. It's important that Congress continue to actively oversee the regulators."

McDonald said Sen.Wayne Allard (R-Colo.) and Reps. Judy Biggert (R-Ill.), Ruben E. Hinojosa (D-Texas), and Donald A. Manzullo (R-Ill.), "as well as the more than 250 members of Congress who weighed in on this issue deserve the gratitude of all REALTORS® for the leadership they showed."

HUD remains committed to reforming RESPA, a 30-year-old law that was created to protect consumers in the settlement of loans. Jackson said in his letter that he will reexamine and possibly revise the rule and resubmit it for public comment before sending it back to OMB. NAR supports reforms that would keep a level playing field for service providers and put consumers first. "We look forward to continuing to work with Alphonso Jackson ... and the administration on efforts to reform RESPA," McDonald said in his statement.

—NAR
6 posted on 03/22/2004 8:40:35 PM PST by Dubya (Jesus saith unto him, I am the way, the truth, and the life: no man cometh unto the Father,but by me)
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To: Dems_R_Losers
Hmmmmmmm . . . my copy of the US Constitution doesn't give the Feds power over any of this stuff.

Maybe it's an obsolete version; it seeks to limit Big Stupid Government, not enable it.

7 posted on 03/22/2004 8:42:47 PM PST by Hank Rearden (Never let your life be directed by people who could only get government jobs.)
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To: Dems_R_Losers
"The Realtors and mortgage bankers have killed this reform to protect their profits."

It's actually much worse than it looks. All the banksters do is create an account with your name on it, monetize your mortgage note, then effectively loan you your own money at interest. What is the bankster rate of return on an investment that cost them nothing?
8 posted on 03/22/2004 8:53:10 PM PST by agitator (...And that no man might buy or sell, save he that had the mark)
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To: agitator
Are you trying to say that banks don't lend the money, it's all a paper transaction? Obviously, you don't know what your talking about. Almost 90% of banks and mortgage
companies sell to Fannie and Freddie. When the loan closes they expect the money immediately. Where do you think this money comes from? The bank
9 posted on 03/22/2004 9:35:41 PM PST by estrogen (LA)
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To: Dems_R_Losers
This is an incredible cave-in by the Bush Administration. You can look forward to continuing to pay rip-off prices for title insurance, closings, and other loan related services, and forget about knowing how much you are actually going to pay before you get to the closing table. The Realtors and mortgage bankers have killed this reform to protect their profits.

I have been in about 10 sales/purchases of homes and have never been ripped off. Estimates were always VERY close if not exact.

10 posted on 03/22/2004 9:38:24 PM PST by cinFLA
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To: kmiller1k
Just closed refi in October in California--not even close on the estimate

How come. We refi'd a few months ago and had no problem.

11 posted on 03/22/2004 9:39:22 PM PST by cinFLA
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To: estrogen
Banks don't loan *their* money, nor do they loan other depositor's money. They monetize your note - i.e., create money out of thin air, and put it in an account with your name on it. Then they can either sell your promise to repay yourself to somebody else or just collect interest for reminding you to pay yourself back :)

Please endeavor to learn something about the monetary system before engaging me again.
12 posted on 03/22/2004 9:40:53 PM PST by agitator (...And that no man might buy or sell, save he that had the mark)
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