House subcommittee holding RESPA hearing
Posted in RESPA reform By Matt Carter, Wednesday, September 10, 2008.North Carolina Democrat Mel Watt has scheduled a hearing on HUD's proposed RESPA rule for Tuesday Sept. 16 to "examine the impacts of HUD’s proposed RESPA reforms on consumers and other stakeholders in the mortgage settlement process" (see press release below).
Watt chairs the House Subcommittee on Oversight and Investigations, which is under the umbrella of Barney Frank's Financial Services Committee.
It doesn't look like Watt signed the Hinojosa-Biggert letter asking HUD to withdraw the rule change and work with the Fed on loan disclosures.
Here's some of what Rep. Watt had to say back in February, 2003, when another Financial Services subcommittee (Housing and Community Opportunity) held a hearing on HUD's previous RESPA reform proposal. It's interesting to note that HUD seems to have at least tried to address Watt's two biggest concerns about the previous proposal -- making it easier for consumers to shop for individual settlement services, rather than an entire loan package, and the Section 8 safe harbor:
****
Tuesday, Feb. 25, 2003 U.S. House of Representatives, Subcommittee on Housing and Community Opportunity, Committee on Financial Services, Washington, D.C.
Mr. Watt: If I have listened carefully to all of the people on this panel who have testified, I have concluded that the only person who has wholeheartedly endorsed this proposal is [John Courson, Chairman of the Mortgage Bankers Association], although the gentleman on the end, whose name I cannot pronounce --
Mr. GARCZYNSKI: Garczynski
[Laughter.]
Mr. WATT: -- Garczynski [Gary Garczynski, who testified for the National Association of Home Builders] -- said that he was endorsing it, then he proceeded to say that he wanted several different changes made to it for home builders.
So I take it the only person on this panel who actually endorses this proposal as it is written is Mr. Courson. Am I correct in that?
Mr. COURSON: Congressman, I—let me characterize—I did say in my testimony we have submitted a 60-page comment letter that we did offer some suggested modifications. We certainly support——
Mr. WATT: So you do not endorse it either, then?
[Laughter.]
Mr. COURSON: I did not say that.
Mr. WATT: All right. Well, let me—let me get—I was going to focus more on you because you were the—you were the person who seemed to be endorsing it most. And you seemed to suggest that this will increase competition. And it may well increase competition between lenders. I think some of us are concerned at—about the impact on competition below the level of the lender.
And let me just play this out for you because as I understand this proposal, the Guaranteed Mortgage Package is a one number figure. And if I get a one number figure from you, as a lender, I do not know what is in that one number figure for attorney's fees, for title insurance, for deed preparation, for recording fees. I have got one number. And so I do not find out, as I understand it, until I get to the closing to a settlement sheet what the specific number is for attorney's fees and the various other components of that one number.
How do I, under those circumstances, have the ability to go out and shop, as you said, for a lower attorney's fee, a lower mortgage—title insurance premium? You know, I do not know how—and I think what you said is it might increase competition between lenders, but what you are—what you have done is set up a system where you control the whole system, as the lender, for title insurance, for attorney's fees, for the whole range of other things that are variable. Now, recording fees are controlled. Title insurance premiums may be controlled. But there is a whole range of services that I could go and shop if I had the numbers and if I were inclined to shop.
Now, that is one concern I have about it. And maybe you have an answer to that.
My second concern is that with this Section 8 exemption, which is, in effect, I understand, a safe harbor, if I get down to the closing, I get my fees disclosed—if something is dramatically out of line—suppose you have squeezed everybody—you have squeezed the title insurance company—you have squeezed the title lawyer and, in the process, what you have done is you have increased the amount of fees that are paid to the lender. And now you are telling me I cannot even—I do not even have any recourse against you for doing that because you have got a Section 8 exemption there.
Now, those are the concerns I have about what you are saying. And perhaps there are responses. I hope you will use the balance of the time, maybe, to respond to it.
Mr. COURSON: I would be happy to, Congressman.
When a consumer comes to one of our offices, they want a loan. They want a mortgage loan.
Mr. WATT: No, I want the best loan I can get. I mean, I—and I want the best legal fees I can get. I want the—you know, I want to have the option to choose to use a lawyer friend of mine, even if—even if he charges me more. If you are not telling me how much he is charging for that, I do not—you know, you are assuming the only thing I am looking for is a loan. And that is just not the case in my experience.
Mr. COURSON: May I finish? I will finish the rest of my answer now.
And when that person comes, they obviously are concerned about the amount of cash that it is going to take to close that loan and the rates and the payment that they will have. And I will submit to you today, Congressman, that people that come—the customers that come to one of our retail branch offices—coming for a loan do receive a piece of paper that has itemized costs on it. And——
Mr. WATT: But does—is that required under this?
Mr. COURSON: It—well, no, it——
Mr. WATT: I am saying required under this—under these regulations.
Mr. COURSON: That is correct.
Chairman NEY: I am sorry, the time has expired.
...
[Watt's opening comments are also revealing]
Mr. Watt:I think I agree with the Chairman that we all think that some procedures that make the buyers more aware of what is happening, and speed up the process, and less complex are desirable, but that the devil is always in the details. And how you get there from here is a very complex issue that, I guess I have probably been dealing with longer than most people on this committee because I practiced law for 22 years doing real estate work before I came to Congress. So that is 22 years plus the 10 years that we have been talking about this on the committee. Thirty-two years I have been working on this issue, and some things that appear to be logical are not necessarily the most logical way to proceed. And some ways that appear to be illogical may be the only way that you can achieve the necessary objectives.
So I will be anxious to listen to all of the people who have input to make on this issue. I think our objectives are all the same, to simplify and make the process more transparent and more visible. How we get there from here can be a very difficult issue, and I will be looking forward to your suggestions about how you do that.
I did submit a letter to HUD on this issue on the proposed regs and they did not much care for what I had to say, but maybe you all can have some influence, and maybe we can have some influence in this process.
****
Press release:
Tuesday, September 16, 2008
10:00 a.m., 2128
The Subcommittee on Oversight and Investigations will hold a hearing entitled “HUD’s Proposed RESPA Rule.”
Who: The Financial Services Subcommittee on Oversight and Investigations
What: Hearing: "HUD’s Proposed RESPA Rule"
When: Tuesday, September 16, 2008 10:00 a.m.
Where: 2128 Rayburn House Office Building
You must login or register to post a comment.