2008 RESPA Reform Regulation

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Issue

Achieving compliance with the 2008 RESPA regulations.

Position Statement

ABA has consistently supported efforts to improve mortgage costs disclosures and make shopping easier for consumers. ABA generally agrees with HUD's objectives of improving mortgage-related disclosures. Banks are very concerned, however, with the 2008 changes to Regulation X, as these final regulations impose far-reaching revisions to existing law and generate significant compliance burdens for all entities involved in mortgage lending. In addition, the rules remain ambiguous, and subject to constant revisions and change, which creates enormous compliance difficulties for banks.

Explanation

Over the past several years there have been a number of initiatives intended to address possible reform of the mortgage lending process. During this time ABA worked with other industry groups, consumer advocacy groups, HUD, and the Federal Reserve to develop a proposal to amend the applicable regulations in order to update and improve the mortgage shopping and settlement process.

These various attempts culminated on November 12, 2008, when the Department of Housing and Urban Development (HUD) finalized regulations to amend Regulation X. HUD's final rules were published in the Federal Register, at 73 Federal Register 68203, on November 17, 2008. The implementation date for most changes was January 1, 2010. 

The recently finalized rules have brought forth wholesale changes to the mortgage origination process, including wholesale changes to disclosures, new form configurations, strict tolerances for settlement service costs, new timing requirements, reinterpretations of RESPA's criminal provisions under Section 8, and added liabilities for all mortgage originators.

ABA has three related concerns. First, ABA does not believe that HUD's Final Rule was fully successful in simplifying or clarifying mortgage disclosures for consumers. The provisions of the proposed rule increase paperwork for all settlement service providers, and introduce elements of much confusion for consumers. Second, HUD's new rules are causing dire compliance difficulties for banks. The new rule contains very problematic mandates, some being extremely difficult to implement, and others being imprecise in meaning and application. The new provisions are so complex that they have necessitated substantial supplementary issuances to provide urgently needed clarifications for compliance. 

Finally, the final rule overlaps with, and at times replicates, disclosures mandated under other federal laws. The agencies engaged in issuing these important consumer protection regulations have not coordinated efforts and have therefore created a confusing web of duplicative and disjointed rules and disclosures.

ABA believes that to achieve truly effective reforms that benefit consumers, the changes to RESPA must be undertaken in conjunction with Truth in Lending (TILA) disclosures so as to harmonize the two disclosure laws that guide consumers in the mortgage shopping process. This process is currently underway as the Consumer Financial Protection Board (CFPB) is following orders under the Dodd-Frank Act that require CFPB issue a proposal for integrated mortgage disclosures that merge the forms required by RESPA and TILA.  (See related issues paper entitled "Mortgage Disclosure Reform (RESPA-TILA Merger"). 

Going forward, ABA will work with CFPB to support the ongoing disclosure merger process and ensure that new rules result in simpler regulations that facilitate compliance and improve information disclosed to consumers. 

Contact for further information, please contact Rod Alba (202) 663-5592.