Magazine article Mortgage Banking

Friends in High Places

Magazine article Mortgage Banking

Friends in High Places

Article excerpt

Like anything worth having, it appears that a streamlined, uniform, simple set of disclosures and protections for consumers to have for mortgage settlement is going to take a while to achieve. But it is starting to gather steam. And what's more, there are key sympathizers in top places. At the recent annual convention of the Mortgage Bankers Association of America (MBA) even the HUD secretary recognized that a movement afoot supporting this change packs considerable merit. And it turns out, he has his own reasons to be supportive.

HUD Secretary Andrew Cuomo told a packed general session that early in his career, prior to becoming a privatesector developer of housing, he had been a real estate attorney. His firm specialized in closings and he recalled they typically had five to six of them going on simultaneously, "all dealing with one tiny little problem, one RESPA [Real Estate Settlement Procedures Act] issue or another RESPA issue."

He conceded to the audience, "I finally said, 'I can't take this any more,' and I ran to the profession of development/construction. It's a cruel irony, I think, that a person who left the practice of law because he couldn't deal with RESPA and the Truth-in-Lending Act [TILA] now is responsible for regulating it. But I can understand exactly the sentiment that you feel."

In case he needed to cement his allegiance any further with the industry on RESPA, he added, "The only reason that RESPA isn't a four-letter word is because the regulations require a fifth letter."

The secretary had won over most of the audience with those remarks and sounded the part of a willing and able ally. Yet he was not alone on that front. Both secondary market corporation top executives added remarks of their own in support of the RESPA reform cause. Jim Johnson, chairman and CEO, Fannie Mae, said in his speech, "We share your concern that we finally address and do something about the ambiguity that flows from the old RESPA. We stand ready to help do something." Leland Brendsel, chairman and CEO, Freddie Mac, told the convention audience, "RESPA is out of date and has not kept pace with industry changes. Everyone will benefit from a simpler and better rule. Certainly this is an important issue for the industry."

Brendsel added that the cause of reform will be "a tough challenge this coming year" for the new MBA president, Marc Smith. Smith has been handed the ball on the 50-yard line by outgoing president Ron McCord, who championed the cause of comprehensive RESPA/TILA reform during his tenure. McCord advanced the cause considerably with regulators, lawmakers and the industry. But translating widespread support for reform into a specific set of proposals for Congress represents the real heavy lifting that's ahead. That is something that McCord himself readily acknowledges.

In his speech to the opening general session of the convention, McCord said, "This is only the beginning. As we collectively come to an agreement on the kind of reform that we, as an industry, envision, we must begin the difficult process of building consensus with other industry and consumer groups. True RESPA and Truth-in-Lending reform will only be accomplished or taken seriously by Congress if we achieve a collective voice with all groups."

McCord knew that the first step before tackling consensus building outside the mortgage industry was forging it with his own members. That has been moving along, but not without uncovering some key points considered nonnegotiable for most MBA members. It turns out, where things get dicey is around the idea of giving up Section 8 of RESPA, which is one of the only things considered worth keeping the existing statute. Section 8 prohibits paying referral fees or anything of value in exchange for sending loan business or settlement service business to a certain provider.

A survey of MBA's members done shortly before the October convention showed that Section 8 was the area members had the most misgivings about changing. …

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