MADISON, Wis. – Credit unions that thought the U.S. Department of Housing and Urban Development's March 22nd decision to pull its proposed Real Estate Settlement Procedures Act reform rule spelled the end of incentives for Guaranteed Mortgage Packages are in for a rude awakening, say mortgage experts. Not only are some national settlement service providers already offering GMPs, but at least one national credit union is preparing to announce its own within a couple of months. “The mortgage industry is still operating under the RESPA rule, nothing has changed on that end,” says CUNA Mutual Mortgage SVP/COO Dan Rotert. “The only thing that has changed is the impetus for reform has shifted. Bundling of mortgage services will progress but slowly.” Rotert reiterated what he and others in the mortgage industry expressed before: that while HUD's objectives in crafting RESPA reform were acceptable, the way the agency proposed implementing those objectives outweighed any of the benefits. The intent of RESPA reform, he explained, was to provide the consumer the ability to make an apples to apples comparison between loan programs from different providers and then be able to choose from among them, as well as protect consumers from being hit with closing costs substantially higher than lenders' good faith estimates. That sounded fair and nobody in the industry would object to that, says Rotert. “The problem though is the mortgage lending process doesn't lend itself well to being homogenized,” he say. “The mortgage process is the only industry I can think of that exists to aggregate volume,” he adds. “You have so many different product variations and different pricing mechanisms that control different parts of the transactions. Mortgages are a completely different animal from any type of consumer loan, and the mortgage transaction is totally different from any other purchase transaction. When you try to bring a level of consistency to the market like HUD tried to do, the tentacles are more far-reaching. There's an endless list of sub-industries. You're not going to find anyone opposed to the principle of simplifying the mortgage process, but the reality is it's a complicated process and no amount of regulation can simplify it.” That explains why, Rotert opines, there was such a “vocal and vehement” lobbying campaign waged to defeat the RESPA proposal. “Everyone would be willing to compromise to some degree, but HUD's proposal didn't make anyone happy and ultimately didn't address the issue at hand which was simplifying the mortgage process for the consumer,” says Rotert, adding, “There is no way to simplify the mortgage process through regulation, but it can be done through market factors. Albeit the consolidation of service companies and the impetus to provide a smoother and faster delivery of the mortgage transaction will be a slow migration.” Evidence of that migration is already beginning to turn up. Last October, Richmond, Va.-based LandAmerica Financial Group Inc., a leading provider of real estate transaction services, acquired LERETA Corp., a national tax service and flood hazard certification company headquartered in Covina, Calif. The company is in the process of creating a product branded as one-stop shopping for consumers. “Providers are coming up with their own aggregation of services and building technologies around them to simplify the delivery process,” says Rotert. Navy FCU's Lou Jennings, executive vp lending department, describes HUD's RESPA reform proposal as a “very noble goal. Everyone in theory wants the mortgage settlement process to be more open and fair to the consumer, it would be hard to dispute that. But the RESPA reform proposal was just a bad proposal.” Jennings said Navy FCU was in the process a couple of years ago of putting its own bundled guaranteed mortgage plan together when HUD announced its GMP as part of the reform proposal. The credit union decided to hold off rolling its product out and take a wait-and-see position to see what HUD was doing. It then decided to introduce the product but again postponed that because Jennings said mortgage volume at Navy was so high. Now, said Jennings, Navy is ready to introduce its bundled mortgage package, and he'd like to see that happen no later than May. The credit union has already trained its supervisors on the new guaranteed mortgage product, so Jennings said he doesn't want to hold off introducing it much longer. He realizes though that depending on how long the mortgage volume spike continues, it may have to retrain some people. Navy FCU's GMP would give members a guarantee on their closing costs. If the costs wound up being more than $100 above iswhat quoted them on the Good Faith Estimate, then Navy would make up the difference, up to $500. Members will receive guarantee certificates with the product stipulations. In addition to the guaranteed closing price, Navy FCU will still give members an itemized estimate of what the borrower will incur in fees. “Navy FCU has done research on this and we know from the data that we can get pretty close to the estimates we make,” says Jennings. “We're not doing this because our members have beaten us up with a demand for this type of product, that's not the driver. We want to give the member peace of mind, and the uncertainty of the mortgage closing process is a concern to them.” Jennings explained that one of the most challenging parts of putting Navy's bundled package together is that as a nationwide credit union, it has to be aware of the fees in every state and make sure the information the credit union has is up-to-date, “otherwise we can miss the estimated cost.” To assure the fee information Navy has is current, the credit union is using its mortgage operations around the country to monitor changes in fees in their area. The credit union is also keeping in touch with counties and jurisdictions where it does business to be sure it has a handle on things like recording fees. “Unfortunately there's no nationwide database that keeps all of this current,” he says. Jennings agrees with Rotert that bundling and guaranteed mortgage packages are inevitable even without RESPA reform. “This is something a lot of lenders will be offering even without a push from HUD,” he says. -

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