Magazine article The Small Business Advocate

Impact of Proposed Real Estate Settlement Rule Examined

Magazine article The Small Business Advocate

Impact of Proposed Real Estate Settlement Rule Examined

Article excerpt

On June 11, the Office of Advocacy filed comments on the Department of Housing and Urban Development's "Real Estate Settlement Procedures Act (RESPA): Proposed Rule to Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs." The proposed rule is intended to simplify and improve the disclosure requirements for mortgage settlement costs under the Real Estate Settlement Procedures Act of 1974 (RESPA) to protect consumers from unnecessarily high settlement costs.

Advocacy has worked on RESPA reform for several years. In July 2002, HUD proposed a RESPA rule that contained major changes to industry practices, including disclosure of mortgage broker fees and packaging. Because many of the businesses in the real estate industry are small, Advocacy sub- mitted comments expressing con- cerns about the potential economic impact of the changes on small entities in October 2002. HUD withdrew that proposal in early 2004 and subsequently held small business roundtables with Advocacy in Los Angeles, Chicago, and Dallas so HUD could hear small business concerns about the RESPA proposal.

On March 14, 2008, HUD published a new RESPA proposal which, among other changes, stan- dardizes the good faith estimate form to make it easier to use for shopping among settlement service providers; provides a closing script to be read to borrowers; includes disclosure of the yield-spread pre- mium; and clarifies when RESPA permits certain pricing mechanisms such as average cost pricing and volume-based discounts for settle- ment services. …

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