In the last several months HUD passed some new laws regarding, specifically, a new Good Faith Estimate (GFE) that will go into effect in 2009. The intended purpose of this new GFE is to have more disclosure to the consumer so they know what they are getting and paying for. The problem…that is not the problem. The problem is that the consumer is not educated enough to know what they are looking at, and what it means.
It is sad that we have to come up with all these new rulings to “protect” the consumer. If this industry actually had some worthwhile regulations that would keep the yahoos out then that would help a ton. And it is sad that people intentionally mislead folks, or maybe at least unintentionally because they have no interest in educating the consumer.
Regardless, for those of you who know us, you know that we have no problem giving you our opinion (or the facts, as we think about them). So here you go:
Fact #1: As my dad would say, “HUD does not know it’s butt from a hole in the ground.” If they honestly think this will solve the major issues then they are kidding themselves (see opening paragraph). It is utterly fascinating to me that HUD would completely disregard the people who are in this industry and try to come up with their own thing.
Fact #2: Consumers do not want more forms, longer forms (the GFE is going from 1 page to 5!), disclosing more info they already think is greek and do not understand. Consumers want people who are trust worthy, will educate them on the realities they are facing in a mortgage and will walk them through the process from start to finish. They want people who will do what they actually say they will do (novel idea).
For those of you who are interested, here is the article about the suit that NAMB filed against HUD.
The National Association of Mortgage Brokers (NAMB) filed a lawsuit against the U.S. Department of Housing and Urban Development (HUD) after it issued the Real Estate Settlement Procedures Act (RESPA) Final Rule issued November 17, 2008.
NAMB, with the support of Baker & Hostetler LLP and the Federal Policy Group, argues that the Final Rule is in violation of law, finalized on a flawed consumer testing methodology and will have a detrimental impact on small businesses consequently having a negative affect on consumers.
“HUD has failed to examine properly the Final Rule’s impact on small businesses,” said Marc Savitt, NAMB President. “It will put small business mortgage professionals at a significant competitive disadvantage, impeding competition in the mortgage industry and ultimately hurting consumers. What we are looking for is a level playing field for consumers.”
HUD was quick to react to the announcement that NAMB had filed the suit.
In this housing market, the nation is crying out for reasonable regulation to help families shop for and save money on the largest purchase of their lives, HUD commented. This rule is that reasonable regulation and it helps consumers to avoid getting into trouble in the first place. It’s mystifying why anyone would stand in the way of the kind of transparency this rule brings to the marketplace.
The lawsuit against HUD states that the Final Rule is “arbitrary and capricious,” contrary to the intent of Congress, and fails to offer any rational reasons for its rejection of alternative approaches. The case alleges the Final Rule discriminates against mortgage brokers with the required broker-only disclosure of yield spread premium (YSP), placing them at a permanent disadvantage in the marketplace.
According to Savitt, the complaint includes a laundry list of the different government agencies that have had a problem with the proposed rule.
Savitt told RESPA News that HUD has disregarded numerous federal and private sector studies providing evidence that different origination channels disclosing differently confuses consumers, and will often times cause them to choose a more expensive mortgage product.
NAMB argues that consumer studies conducted by HUD failed to test both the consumer understanding of loan terms and comparative shopping when originator compensation was not disclosed, and disclosures in transactions involving competing originators.
“Flawed testing methodology prevented HUD from adequately assessing consumer understanding of provisions in the originally Proposed Rule,”
Savitt said. This led to the Final Rule being issued on flawed and inaccurate conclusions, he added.
“Reform of RESPA is necessary to accomplish a simplified mortgage process,” Savitt stated, “But implementing provisions harmful to small businesses and consumers in doing so, is not the answer.”
The final rule is contrary to the intent of Congress, Savitt told RESPA News. HUD can’t reasonably justify this thing. Most importantly, it is not in the best interest of the public. They failed to offer any reasons for rejecting the alternatives we presented. Case in point: NAMB gave them a prototype of a one page GFE that was a mirror image of the
HUD-1 settlement statement, which makes sense.
Savitt contends HUD had every opportunity to get this thing right but in the end is failing the consumer.