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WASHINGTON – The Department of Housing and Urban Development, responding to criticism from members of Congress and various financial services-related organizations – including CUNA – to the first version of its proposed rule reforming the Real Estate Settlement Procedures Act (RESPA), has gone back to the drawing board to try again. CUNA Assistant General Counsel Jeff Bloch said he was unsure how extensive the changes would be. He said there was speculation HUD would come out with a second rule that would integrate parts of the first rule, as well as include new details. According to Bloch, HUD had intended to have a final rule out by now, but “that will be delayed awhile,” he said. The proposed RESPA rule was intended to improve the mortgage process and lower settlement costs for borrowers by changing the Good Faith Estimate (GFE) form to ensure more accurate estimates. In addition, in an effort to simplify the mortgage process, promote competition, and encourage borrowers to shop for a loan, the proposed rule would allow lenders to offer borrowers Guaranteed Mortgage Packages that would contain a lump sum price for all loan originator and government-required settlement costs. In April, during the Senate Banking Committee’s hearing on HUD’s proposed RESPA rule, Sen. Richard Shelby (R-Ala.) sharply criticized the content of the proposed rule (CU Times, April 16). While Shelby described HUD’s effort to simplify the paperwork involved with the home-buying process as a “worthy goal” and said “the underlying goals behind HUD’s effort are laudable,” the congressman also opined that HUD’s proposal wouldn’t accomplish its goals. In fact, he went so far as calling the proposed rule “anti competitive; significantly damaging to small businesses; and lacking effective provisions to provide clarification for consumers.” He took particular aim at HUD’s guaranteed mortgage packaging proposal, saying it “accomplishes the opposite of what is intended,” would hurt small businesses, and would only allow large lending institutions to compete successfully under it. CUNA, in its Oct. 28, 2002-comment letter to HUD on RESPA, voiced similar concern that “in our view, GMPs will have the opposite result and will actually result in significant, additional confusion.” CUNA further stated that “HUD’s proposal to allow lenders to offer GMPs will likely place small lenders, such as credit unions, at a distinct competitive disadvantage, as compared to large financial institutions. The trade association called “referring to GMPs as a `guarantee’ is a misnomer and may mislead borrowers.” Bloch told Credit Union Times that “CUNA is still supportive of the concept and objectives RESPA is trying to achieve, but there wasn’t much in the proposed bill that we liked. It requires a lot of changes.” He stressed that totally stopping the reform process “wouldn’t make sense because CUNA still recognizes the need for reform,” just not in the form it was in the first proposed rule. -

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