REAL ESTATE SETTLEMENT PROCEDURES ACT (RESPA)

ISSUE: In June 2005 the Department of Housing and Urban Development (HUD) introduced its "roadmap to RESPA reform," a continuation of its efforts to revamp the Real Estate Settlement Procedures Act (RESPA) regulations.

NAR POSITION: NAR advocates a market based approach to RESPA reform that encourages fair competition, protects consumer choice and provides "transparency," or full disclosure of costs and services in the mortgage transaction.

OPPOSING VIEWS: Large lender groups support a pro-packaging rule that provides a "safe harbor" or exemption from RESPA's anti-kickback provisions. Most large lenders do not support the enhanced GFE.

IMPACT ON REALTORS®: Hud's withdrawn 2004 RESPA rule put lenders in control of the entire real estate settlement transaction while operating under an exemption from Section 8's anti-kickback provisions. The rule would have most likely lead to increased concentration within the industry and reduce competition. Any regulation that moves an industry toward a more concentrated market structure should be viewed with considerable caution. An increased concentration of powers into the hands of a smaller number of lenders and service providers could lead to higher closing costs.

STATUS/OUTLOOK: HUD held a series of informal meetings with industry and consumer group representatives to initiate a "meaningful exchange of ideas" on possible changes to the Real Estate Settlement Procedures Act (RESPA) regulations. The roundtable meetings were held in July and August; four roundtables were held at HUD?s headquarters in Washington D.C. and three roundtables co-hosted with the Small Business Administration in Los Angeles, Chicago and Fort Worth.

At the roundtables, HUD disclosed the provisions of a 2004 "final" RESPA rule which was withdrawn from the Office of Management and Budget's (OMB) consideration. The 2004 RESPA rule would have included an enhanced Good Faith Estimate (GFE) four-page form with yield spread premium disclosure and tolerances for third party settlement services; a Mortgage Package Offer (MPO) (formerly the Guaranteed Mortgage Package Offer or GMP), which was afforded an exemption from RESPA's Section 8 anti-kickback provisions; and a Settlement Services Package (SSP) product which would allow for non-lenders to offer packages including appraisals, title services, recording fees and other lender required settlement services. HUD's 2004 rule would not have required a lender to accept an SSP the consumer brought to the transaction.

During last two roundtables in Washington, DC, HUD officials stated, "No rule has been written." However, they indicated the agency is committed to drafting proposed rule that would provide greater certainty of closing costs for consumers. While the word "consensus" was not used in connection with the seven roundtables, the majority of participants seemed to be in general agreement that HUD should pursue an enhanced or improved GFE and should forgo regulatory efforts to develop a packaging rule. NAR continues to work with HUD to communicate the interests of REALTORS and consumers.

NAR is launching a REALTOR® Awareness Campaign to help educate REALTORS® about RESPA requirements. 
Please use the RESPA DOs and DON'Ts as a quick reference guide