Housing Bubble

Home Builders support HUD RESPA proposal to simplify home buying process

February 26, 2003

The National Association of Home Builders (NAHB) today expressed support for a proposal by the Department of Housing and Urban Development to simplify the home buying process by making modifications to the Real Estate Settlement Procedures Act (RESPA).

"NAHB applauds this initiative and believes the effort has great potential to simplify mortgage shopping and loan closings. The proposed changes should also lower mortgage transaction costs and help minimize unexpected charges at the time of loan settlement," Gary Garczynski, immediate past president of NAHB and a builder/developer from Woodbridge, Va., told the House Financial Services Housing Subcommittee.

Noting that NAHB is working as an enthusiastic partner with the Bush Administration to expand homeownership opportunities, particularly among minorities, Garczynski said that the RESPA changes proposed by HUD are important to advancing these efforts.

"The complexity and cost of the home financing process have been major impediments to increasing minority homeownership rates and HUD's proposed regulatory changes would do much to increase access to mortgage financing," he said.

Observing that loans for new homes have specific characteristics that must be addressed in any RESPA reform, Garczynski suggested additional changes to the HUD proposal to recognize that the loan origination process for newly built homes may last four to nine months or more.

Specifically, for both the Good Faith Estimate and Guaranteed Mortgage Package components of the HUD proposed rule, Garczynski suggested an alternative method for providing final quotes and guarantees comparable to the timing of guarantees that would be made in financing an existing home purchase.

"For example, a lender would provide preliminary estimates at the time of the initial application and then issue final, guaranteed estimates 30 or 60 days prior to closing. This would give customers enough time to shop for a better loan if they believe they can find better terms than what's in the final loan package. It would also give the lender a chance to make adjustments in the loan package during the time from the original application to closing, a period that often stretches over several months," he said.

Source: National Association of Home Builders