RESPA Hearing Scheduled
WWR Article - January 2, 2004
In the latest development in the battle against the Department of Housing and Urban Development's proposed RESPA amendments, House Small Business Committee Chairman Don Manzullo (R-IL) announced a hearing before his committee, tentatively set for January 6, on the proposal that he believes will "destroy thousands of American small businesses in the real estate industries." HUD Acting Secretary Alphonso Jackson has been called to testify, along with representatives of settlement service providers, title companies, mortgage brokers, realtors and others.
ICBA will testify regarding our concerns about how the proposal may hurt community banks and the small businesses they work with.
HUD has sent its controversial proposed rule to the Office of Management and Budget for review before final publication. "HUD's decision to sneak through this flawed rule during the congressional recess once again demonstrates HUD's disdain for small businesses and the United States Congress," Chairman Manzullo said in a statement. Manzullo has strongly criticized HUD for its inadequate study of the economic impact of the proposed regulation on small businesses as required by the Regulatory Flexibility Act.
HUD's economic analysis simply states that it is difficult to reach firm conclusions about the magnitude of the impact the proposed rule may have on small lenders. However, HUD estimates that over half of the $6.3 billion in cost savings HUD hopes the proposal will bring to consumers will come at the expense of small businesses, including $2.2 billion from small lenders. HUD claims that those who will suffer the revenue loss usually overcharge uninformed borrowers, are high cost producers or benefit from the current system's restrictions on competition.
HUD expects the revised rule to lower consumer costs by forcing those in the mortgage industry to negotiate for packages of settlement services at a guaranteed price to consumers. HUD's analysis states that while small lenders may be disadvantaged under packaging because of the "bulk" buying power of large lenders, this does not need to be the case. HUD expects that if specialized packaging firms develop, they will offer packages to small lenders as well as large. HUD hopes that, over time, competition will drive down the cost of the packages to the benefit of the consumer.