The Department of Housing and Urban Development may issue new guidance under the Real Estate Settlement Procedures Act (RESPA) to address possible changes in warehouse lending used to fund federally insured mortgages.
According to HUD, its RESPA regulations relevant to this area were developed and revised over 15 years ago, when it amended the rules to add a secondary market exemption and define “table-funding.”
“In order to assist HUD in determining whether such guidance is needed and to formulate such guidance, HUD is seeking information on how funding mechanisms have evolved in recent years, and especially on how warehouse lending currently operates within residential real estate mortgage transactions,” the agency said a statement.
HUD is seeking input from the mortgage lending industry, federal, state, and local consumer protection and enforcement agencies; consumer groups; and other members of the public. Based on information received, HUD will decide if any, additional guidance is needed on the scope of RESPA as applied to current mortgage funding practices.
“This solicitation is timely, given new restrictions on loan originator compensation, changes to federal preemption standards and the state mortgage banker and mortgage broker licenses that will soon be necessary,” said Phillip L. Schulman of K&L Gates in a statement.
It also makes sense considering HUD’s decision to increase net worth requirements and whether agreements between warehouse line providers and originators constitute financing and/or secondary market transactions. “HUD is aware of these issues in the marketplace and appears poised to address them and provide guidance based on the information it receives from the public,” he said.
The public will have 30 days to comment once the notice is published in the Federal Register. Until then, you can view a copy of the notice here.