Housing Bubble
HUD's Proposed RESPA rule would hurt consumers says ICBA
February 25, 2003
The Independent Community Bankers of America, the nation's largest community bank trade association, submitted testimony to the House Financial Services Housing Subcommittee today opposing the Department of Housing and Urban Development's proposed Real Estate Settlement Procedures Act rule. ICBA strongly opposes the proposed rule because of the damage it will do to consumers, the mortgage finance system, and small loan originators and settlement service providers that participate in it.
"We believe the rule will create an environment where the largest originators and settlement service providers will drive out the smallest, and we are concerned about the ability of smaller banks and service providers to compete against the larger market participants," said Kenneth A. Guenther, ICBA president and CEO, in a written statement. "Larger market participants have the ability to negotiate volume discounts for services within the package with no requirement to pass the savings on to consumers. The result will be less competition, less consumer choice and higher mortgage costs."
The proposed rule will dramatically alter the manner in which mortgages are offered. A key component is the introduction of the Guaranteed Mortgage Package, a package of standardized settlement services and a mortgage loan with a guaranteed interest rate. ICBA is concerned that the proposed rule would deter consumers from shopping for services in the package, as they do now, because they will receive little information about what they are paying for. The mortgage loan process will become more confusing, negatively impacting consumer choice in the selection of individual settlement services, and decrease consumer options for mortgage products.
HUD also proposes to make the Good Faith Estimate of closing costs firmer by significantly limiting or prohibiting how much the costs could rise at closing. Many of the costs are outside of the loan originator's control, but the originator would have to absorb any increases. To guard against such contingencies, loans to all borrowers may be priced higher.
"ICBA and its members place a high value on the importance of homeownership, and our current mortgage finance system has enabled a record number of Americans to realize that dream," Guenther said. "While we are proponents of simplifying the mortgage loan process, and giving the consumer more choices and better access to information, we have serious concerns with the proposed rule."
Copies of today's testimony and the comment letter submitted to HUD on Oct. 28, 2002, may be downloaded from the News and Views section on the ICBA website.
Source: Independent Community Bankers of America
