ALTA President Testifies on RESPA Reform Before House Financial Services Subcommittee

American Land Title Association President Gary Kermott today testified before the House Committee on Financial Services Oversight and Investigations Subcommittee on the Department of Housing and Urban Development’s (HUD) proposed amendment to the Real Estate Settlement and Procedures Act (RESPA).

In his opening comments, Kermott stated, “As we are all painfully aware, the real estate market is experiencing a downturn of historic proportions. The recent federal takeover of Fannie Mae and Freddie Mac, and the bankruptcy filing of Lehman Brothers, are just the latest examples of the severe stress in the housing and financial markets. Although we all agree with the goal of increasing transparency and simplifying the transaction, HUD’s rule does not do so. It would impose increased regulatory burdens on the industry and confusing, lengthy disclosures to homebuyers. In the current environment, it would make things worse.”

Chief among the concerns raised by Kermott was the requirement that settlement agents prepare and read a closing script to homebuyers.

“The closing script will lead to longer or postponed closings, loss of down payments, and increased litigation, while failing to provide any real benefit to consumers. Additionally, the increased time to prepare, read, and explain the closing script will definitely and disproportionally harm smaller settlement companies because they lack the resources to accommodate these extended closings.”

In his closing remarks, Kermott stated, “HUD should limit its efforts to simplifying only the GFE and HUD-1 so that comparisons can be more easily made between the documents. ALTA, along with the National Association of REALTORS® and the Center for Responsible Lending, worked together to develop a set of GFE and HUD 1 forms that is clearer and more transparent than both existing and HUD-proposed forms. This would be a huge improvement for consumers without imposing extraordinary costs on small businesses.”