Proposed changes to the Real Estate Settlement Procedures Act, or RESPA, would have a substantial impact on the $50 billion annual market for consumer mortgage settlement services, according to the U.S. Department of Housing and Urban Development (HUD).
Consumers stand to be the primary beneficiaries, saving approximately $8 billion per year, or $700 per settlement, as a result of the proposed reform, according to Brian Sullivan, spokesman for HUD.
HUD expects that the consumer's ability to shop for the best total package, including the combination of rate and fees, will bring about these savings. "By giving the consumer the ability to shop for multiple Good Faith Estimates, or for multiple Guaranteed Mortgage Packages for no-to-nominal cost to themselves, well, that's going to bring price pressure to bear on the lenders, to get their ducks in a row and maybe to put price pressure on their settlement service providers," said Sullivan.
The RESPA reform comes as a result of consumer feedback. "People have complained long and hard about the difference between the good faith estimate and their settlement statement that they get at the closing table," said Sullivan.
But at the same time, HUD has no interest in ramming its reform through without industry buy-in. "We're not interested in adversely impacting any segment of the mortgage settlement industry, and we don't think we have in our proposal, quite honestly," said Sullivan. "We think that anyone who makes the adjustments will thrive in this new environment."
"HUD Secretary Martinez' interest is to create a mortgage settlement process that is clearer, simpler, and cheaper for consumers," added Sullivan. "Technology will play a big role in this."
HUD expects to issue final rules in the spring.