Copyright 2002 San Antonio Express-News San Antonio
Express-News (Texas)
December 7, 2002, Saturday , METRO
SECTION: BUSINESS; Pg. 1D
LENGTH: 713 words
HEADLINE: HUD
proposal boils a pot ; Mortgage lending industry up in armsover changes in good
faith estimates.
BYLINE: Aissatou
Sidime
BODY:
Texas mortgage bankers and U.S. Department of Housing and Urban Affairs
Secretary Mel Martinez want the same thing: A simpler, more accurate house
buying process.
But deciding how to get there
has pitted most of the mortgage lending industry against Martinez, the
government's watchdog.
The brokers appear to be
losing. In response to two years of complaints and lawsuits over predatory lending, Martinez has proposed radical changes in the
way fees are listed on price estimates - called good faith estimates - that
lenders and brokers give to buyers.
New rules
coming this spring would require lenders to give borrowers a credit toward their
closing costs when the lenders' interest rate includes an add-on for broker
fees, called a yield spread premium.
Lenders
also would be required to give borrowers fixed prices and interest rates on the
good faith estimate.
Nonlender closing costs -
such as a termite inspection - could not change more than 10 percent from the
estimate.
In a separate change, HUD would allow
packaging of all fees into a single price for shoppers who are just interested
in that final figure.
The department says the
changes will save consumers billions of dollars and illuminate what is often the
biggest investment most Americans ever make.
"Consumers pay $50 billion in settlement costs, but $15 billion are
(broker fees), which only half of the time are disclosed to borrowers," HUD
spokesman Brian Sullivan said. "We think 100 percent of the time they should be
disclosed."
Consumer advocates, including the
Consumers Union and Consumer Federation of America, have hailed the proposal as
an overdue step toward boosting confidence in the buying process and getting
more families into houses.
But Texas mortgage
brokers are so vehemently opposed to the rules that they launched a national
wave of letter writing and lobbying of elected officials this fall.
The result was an unprecedented 45,000 responses to
Martinez's proposal.
The brokers argue they will
lose up to two-thirds of their typical compensation and reimbursement if
borrowers are given a credit for financing brokers fees.
"Lenders pay us to bring them loans so they don't have to have more
loan offices," said Dwayne Adams, CEO of Lonestar Financial Services Corp. "I
think the lender should be able to decide if it wants to pay us a rebate."
Brokers say the lost compensation will drive out
loan providers at a time when President Bush is pushing for higher home
ownership.
"Without us, the only people going to
have homes are people with 'A' credit," Adams said.
Brokers' lobbyists also complain the proposed rules are unfair.
"Every lender in the country gets a yield spread
premium," said Everett Ives, a consultant to mortgage brokers. "Now HUD will
require that we give our yield spread premium to borrowers, but not require it
of bankers. That puts bankers at a $1,000 to $2,000 advantage on the typical
mortgage."
Lenders charge "service release
premiums" that brokers say are comparable to brokers' yield spread premiums.
But the proposed rules apply only to loans that
are re-sold - usually by brokers. Many brokers borrow money for a week or two,
lend it to buyers to close loans quickly, and then sell the mortgage to another
lender.
HUD officials deny singling out brokers.
"Mortgage brokers play a vital role in the home
buying process," Sullivan said. "We understand their value. But the consumer's
interest is paramount."
National associations
for real estate agents, title insurers and appraisers say the rules may
unintentionally give lenders too much control over the process.
They have submitted letters claiming the new rule on
packaging services would allow lenders to undercut their prices and actually
lead to less disclosure.
"Our rule does not say
that only bankers can offer packages," Sullivan said. "Anybody can saddle up a
posse and offer a package."
HUD extended its
comment period by 30 days to allow for all voices to be heard.
Martinez most likely only will "tweak" the proposal and
then issue his final ruling next month, Sullivan said.
asidime@express-news.net
GRAPHIC: PHOTO: JOSHUA TRUJILLO/STAFF ; PHOTO: MUG
: Dwayne Adams, CEO of Lonestar Financial Services Corp., is one of the mortgage
brokers battling HUD Secretary Mel Martinez over proposed rule changes that
would cut revenues to brokers. ; MARTINEZ
Document 16 of 977. 