Last week, the U.S. Housing and Urban Development Secretary Shaun Donovan announced his intention to implement the mortgage reforms under the Real Estate Settlement Procedures Act (RESPA) which are scheduled to take full effect on January 1, 2010.
For the first time in more than 30 years, HUD is updating mortgage rules to help consumers shop for the lowest cost mortgage, avoid costly and potentially harmful loan offers, and save an average of $700 according to HUD’s announcement.
Meanwhile, HUD is withdrawing, and announcing its intent to propose revised language relating to, a narrow provision of the final RESPA rule that redefines a prohibited practice called ‘required use’ where consumers are steered toward higher cost mortgage services provided by affiliated businesses.
"We will implement the new RESPA rules as part of broader reforms to the mortgage process. And after further consultation with the public, stakeholders and Congress we will propose a clearer and more effective "required use" definition that truly protects borrowers from those who force them to use affiliated businesses. Needed consumer protections are too important to allow confusion over one specific provision to hold up needed RESPA reforms."
Donovan indicated after a thorough review of more than 1,200 public comments, HUD has rescinded a rule that would’ve restricted builders abilities to forge partnerships with lenders. HUD will propose a new ‘required use’ definition which will help protect home buyers from the influence of disingenuous discounts and incentives that steer consumers to the use of affiliated businesses.
Builders having preferred lenders has caused some problems in the reverse mortgage industry, specifically because of the HECM for purchase. Several companies who are preferred lenders with builders aren’t familiar with the HECM and don’t offer it as an option to borrowers.