HUD
No. 02-069 Brian Sullivan (202) 708-0685, x
7527 |
For Release Wednesday June 26,
2002 |
MARTINEZ ANNOUNCES 'HOMEBUYER BILL OF RIGHTS' - PART OF
BUSH
ADMINISTRATION EFFORT TO EXPAND HOMEOWNERSHIP
OPPORTUNITIES
HUD to Reform Real Estate Settlement Procedures
Act
Read the
new proposed RESPA rule
WASHINGTON - Individuals and families who want to buy or
refinance a home will find the process significantly easier under a
proposal announced today by Housing and Urban Development Secretary
Mel Martinez. Speaking at the National Press Club today, Martinez
likened the reform measure to a "homebuyer bill of rights" that
would require greater disclosure, allow consumers more choice, limit
excessive settlement fees and encourage innovation and competition
in the marketplace.
The proposal would reform the regulatory requirements under the
Real Estate Settlement Procedures Act (RESPA) that govern
settlement fees paid by homebuyers. Late last year, Martinez issued
a policy
statement that clarified HUD's position on fees paid by lenders
to mortgage brokers in the purchasing and refinancing of a home.
"Americans spend approximately $50 billion each year on
settlement costs without knowing exactly what they are paying for or
having the opportunity to shop effectively for the best mortgage to
suit their needs," said Martinez. "The Bush Administration believes
it is time to take the confusion and uncertainty out of the home
buying process by making loan shopping and settlement less
frustrating and more understandable and ultimately, less
costly."
The proposed "homebuyer
bill of rights" is founded on a set of consumer-driven
principles that would guide the settlement process. These principles
mandate that homebuyers have the right:
- To receive settlement cost information early in the process,
allowing them to shop for the mortgage product and settlement
services that best meet their needs;
- To have the disclosed costs be as firm as possible, thereby
avoiding surprises at settlement;
- To benefit from new products, competition and technological
innovations that could lower settlement costs;
- To have access to better borrower education and simplified
disclosure; and,
- To know they are protected through vigorous RESPA enforcement
and a level playing field for all industry providers.
To meet these principles, HUD would reform the home buying
process by:
- Changing the way lender payments to brokers are recorded and
reported to consumers;
- Significantly improving HUD's Good Faith Estimate settlement
cost disclosure; and,
- Removing regulatory barriers to allow market forces and
increased competition to promote greater choice for consumers by
allowing guaranteed packages or "bundling" of settlement services
and mortgage loans.
In addition, Martinez discussed HUD's continuing effort to
empower homebuyers through greater consumer education and RESPA
enforcement. "We also plan to develop legislative proposals that
would further protect consumers in the home buying process,"
Martinez said.
Mortgage Broker and Lender Fees
Under current rules, many borrowers do not understand the role of
the mortgage broker and what fees the broker charges. HUD's proposal
creates a more "transparent" settlement process to facilitate
consumers' understanding of the true costs of their mortgage. The
rule would fundamentally change the way lender payments to mortgage
brokers - yield spread premiums - are recorded and reported to
consumers.
Martinez wants brokers to inform consumers about what they charge
and how lender payments can help lower settlement costs. These
payments now will be clearly disclosed so consumers can make the
best financing choice.
More Choice Through Enhanced Disclosure
The proposal will promote greater choice for the homebuyer in
shopping for lower-cost mortgages and settlement services. It will
significantly improve HUD's Good Faith Estimate (GFE) settlement
cost disclosure to make it firmer and more useful so consumers can
use it to shop for the best deals. The current GFE allows a listing
of charges that falls short of informing consumers what their
big-ticket settlement charges are and who gets them. The current
rules also do not ensure that the GFE is reliable.
Removing Regulatory Barriers
In 1974, RESPA was passed into law to keep settlement costs down
by targeting illegal unearned fees, splits of fees, referral fees
and kickbacks. Over the years, however, RESPA rules have impeded the
offering of guaranteed packages of settlement services and mortgages
that could lower costs and enable consumers to more easily shop for
mortgages. The proposal would remove regulatory barriers to allow
guaranteed mortgage loan packages that will provide more choices for
consumers shopping for their mortgages.
The Office of Management and Budget (OMB) is completing its
review of HUD's proposal. After the proposal is approved by OMB and
provided to Congress for prepublication review for 15 days, the
proposal will be published in the Federal Register and made
available for public comment for 90 days.
HUD is the nation's housing agency committed to increasing
homeownership, particularly among minorities, creating affordable
housing opportunities for low-income Americans, supporting the
homeless, elderly, people with disabilities and people living with
AIDS. The Department also promotes economic and community
development as well as enforces the nation's fair housing laws. More
information about HUD and its programs is available on the Internet
at http://www.hud.gov/index.html.
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