Mortgage Strategies By Michele Francis Builder & Remodelor, June 2003 RESPA Update

After intense negotiations, the National Association of Mortgage Brokers believes its members will get a fair shake from housing secretary Mel Martinez on the disclosure of broker compensation and yield spread premiums.

However, NAMB has still not seen anything in writing and does not expect to until the Department of Housing and Urban Development releases a revised rule, possibly in 30 to 45 days.
HUD is facing a lot of pressure from Congress and other trade groups to revise its RESPA reform rule and issue a revised version for another comment period. Senate Banking Committee chairman Richard Shelby, R-Ala., and House Small business Committee chairman Don Manzullo, R-Ill, made it plain to HUD secretary Martinez that he shouldn’t issue a final rule this spring.

There is a lot of speculation in Washington on what secretary Martinez will do next to advance the rulemaking process. There seems to be no real consensus on what HUD will do.

It is my hopes that the new or revised proposal will characterize yield spread premiums as a lender paid credit to the broker for services and facilities. I would also hope that the first page of the new good faith estimate disclosure will be the same for brokers and retail originators. In this respect, the consumer can “shop the offer” to a broker or a lender and it will look the same.

At Sen. Shelby’s suggestion, HUD also is working on a new disclosure on the compensation mortgage bankers receive from the sale of servicing rights on loans. But it would appear that HUD is having a problem coming up with a way to disclose income that may not be known at the time of the closing. NAMB suggested a disclosure that would say the retail lender “may receive additional compensation when it sells the loan for the value of the servicing rights or the value of the interest rate or combination of both. This amount would not be required to be disclosed. It is still unclear as to what HUD is going to do on this issue as well.

Just as a point of interest on the topic, while Washington has been embroiled in reforming RESPA, the Department of Housing and Urban Development has been quietly increasing the staff of its RESPA enforcement office, which a few years ago had three employees to police the entire real estate industry.

HUD has added a dozen new people to its RESPA office in the past few weeks, HUD assistant secretary John Weicher at an American Land Title Association conference told members that they will continue to add to their staff. “We are literally tripling our enforcement staff.”
“Put your seat belts on gentlemen, it looks like we’re in for a bumpy ride” a memorable one liner from Betty Davis in a great old movie seems to come to mind.

For questions or comments I can be reached at (516) 935-5600 ext. 13 or by mail; Beechwood Capital Company, LLC. 500 N. Broadway, Ste 268 Jericho N.Y. 11753.

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