Shelby Slams RESPA Reform Proposal

WASHINGTON – Using words and phrases such as “anti-competitive,” and “significantly damaging to small businesses,” U.S. Sen. Richard Shelby (R-Ala.) sharply criticized HUD’s proposal to revamp the Real Estate Settlement Procedure Act (RESPA) during the Senate Banking Committee’s hearing on HUD’s proposed RESPA rule. Shelby said simplifying the paperwork involved with the home-buying process was a “worthy goal” and that “the underlying goals behind HUD’s effort are laudable. Simplifying the complex paperwork surrounding home buying has the potential to improve home ownership rates, eliminate unwelcome surprises from occurring at the settlement table, and increase competition within the industry. There is no debate on whether these are worthy goals.” But the senator said HUD’s proposal wouldn’t accomplish that goal, and in fact HUD’s guaranteed mortgage packaging proposal “accomplishes the opposite of what is intended.” Addressing the committee, Shelby called the proposed rule “anti-competitive; significantly damaging to small businesses; and lacking effective provisions to provide clarification for consumers.” He continued that, “While I feel there could be an emerging place for packaging in this current real estate environment, I have significant concerns that HUD’s proposal allows packagers an exemption from disclosing fees. And I have not been able to get a satisfactory answer from anyone that explains why hiding information from consumers protects them.in my experience, the best decisions are made when consumers are armed with all the information they need to make an informed choice. Transparency is a central component.” The senator also said HUD’s proposal would hurt small businesses and only large lending institutions would be able to compete successfully under it. “The result could be that small businesses, who lack the resources of large lenders, could be shut out of the process and only large lending institutions would prevail. Ultimately, competition would be stifled, rather than enhanced, as the large players increase their market share and push small firms out of business. What incentive would exist then to pass on savings to the consumers?” Shelby asked. Lastly, he charged that “the re-characterization of yield spread premiums as a lender payment to the borrower is a misleading one that will limit the broker’s ability to compete on a level playing field with lenders. It would not, in fact, lend `clarity’ to the process.” Shelby asked HUD Secretary Mel Martinez to reconsider the agency’s proposal and “address these concerns.” -