In June 2002, new regulations were first proposed to reform the regulatory requirements of the Real Estate Settlement Procedures Act (RESPA). On Dec. 16, nearly a year and a half later, HUD sent its final rule to the Office of Management and Budget (OMB) for its review.
Representatives from various parts of the real estate industry are characterizing the efforts by HUD as anti-consumer, saying that all of the various proposals on the table have elements that could spell disaster for the homebuyer.
Nevertheless, the transfer of a final rule from HUD to OMB makes good Interim Secretary Alphonso Jackson's promise to outgoing Secretary Mel Martinez that he would carry out the sweeping reforms to the homebuying process proposed by Martinez.
"What you have achieved, I will protect, what you have started, I will finish," Jackson said to Martinez following the Secretary's Dec. 12 resignation speech at the HUD offices in Washington D.C. "Regarding RESPA, Secretary Martinez has taken on a comprehensive task - and some of those outside the Department said it couldn't be done. In fact, I have heard some say 'RESPA reform is dead.' Let me make this as clear as I can … RESPA reform is alive and well, you have my word on it."
President George W. Bush followed up those promises with a few of his own on Dec. 16 when he re-outlined the ongoing master plan for increasing homeownership across America.
The industry was quick to react to the shocking news. "Given the significant number of concerns about the proposed rule that were raised and documented in Congressional hearings, NAMB is disappointed that we were not given an opportunity to review and comment on subsequent changes to the controversial proposal. HUD's decision to move to a final rule without public comment may call into question the integrity of the process and, may ultimately, serve to harm consumers," said NAMB President A.W. Pickel III, CMC.
"I suppose it's not surprising," James Maher, executive vice president of the American Land Title Association, told us. "We have anticipated that HUD would put it's head down and barrel through the wall, so to speak, to the affect that no one seems to want the rule, whether or not you are talking about consumer groups or any of the significant industry groups. If you look at the people who have been characterized as proponents of the rule, their wish lists are mutually exclusive. It just seems an unusual step, and I think that it is unfortunate that it is in final form rather than in reproposed form. It is unfortunate that HUD didn't see the need, after 18 months of rather significant comments, to go back once more and ask the affected industry whether their new ideas are any better than their old ideas. And of course they've chosen not to do that so of course we have some time yet. The OMB can turn the rule around in 5 minutes or weeks. I think they've probably had some advance views of some of the major provisions of the rules, and that would certainly argue in favor of more rapid review. But by the same token, we've also heard that HUD was not going to publish the rule until some time after Congress returned."
"Regarding the RESPA rule going forward, each year millions of American families become homeowners and the the housing market has been the driving force in our economy," Don Kelly, vice president of public affairs, Appraisal Institute, said. "Nevertheless, even real estate, including homes and investments, comes with risk. The appraisal is an important safeguard to protect homeowners and helps them assess that risk. The new RESPA rule will allow lenders to bundle appraisals along with other services and never inform the buyer as to who is providing the appraisal or what level of service has been preformed. This is as anti-consumer as any rule we can imagine."
OMB will now review HUD's final regulations before details of the new rule are made public. RESPA Reform.com will be following up with industry representatives this week to gauge reaction to the news.
Stay tuned to RESPAreform.com for ongoing coverage!