NAMB FIGHT with RESPA

RESPA CALL-TO-ACTION TALKING POINTS

NAMB FIGHT

RESPA Call to Action

1.In today’s mortgage market there is little difference between mortgage brokers and mortgage bankers.a. The distinctions between brokers and lenders have blurred in recent years as lenders themselves typically package and resell loans they originate.b. Consumers are largely unable to distinguish between brokers and lenders, which have similar names, use similar signage, and rely on similar advertising.c. Consumers should not have to figure out these differences because everyone is competing directly. d. Automation has also helped to blur the distinctions between brokers and lenders. Most of the industry uses the same computer software, so the reality is that the difference between a broker transactions and a lender transaction is merely a key stroke on a computer!e. If applicable and you are doing both broker and lender transactions please elaborate on how you are able to function in this manner. Discuss how you can act in multiple capacities and how it can be confusing to consumers because you can do both, yet the disclosures are different.
2.Requiring broker transactions, but not other loan originator transactions, to make compensation disclosures on the Good Faith Estimate (GFE) inhibits competition, is unfair to small business mortgage brokers, limits consumer choice, confuses consumers, increases prices, and hurts borrowers. a. Exhaustive studies of mortgage disclosures by the Federal Trade Commission, the government’s principal consumer protection agency, in 2004 and 2007 show that additional disclosures of mortgage broker compensation created confusion, caused consumers to choose more expensive loans, led to a bias against broker-assisted transactions, and impeded competition, thus hurting consumers.b. In order to promote comparison shopping there should be a corresponding requirement for lenders to disclose compensation paid to their own sales staff. Fees similar to the YSP are present in any mortgage origination distribution channel, regardless of whether a broker is involved. c. Requiring brokers, but not other loan originators, to make compensation disclosures enables the brokers’ competitors to steer consumers away from brokers, even if brokers offer more favorable loans.
The proposed GFE form misleads consumers by perpetuating the fallacy that through a lender a zero-point/zero-cost loan is free to the consumer. The GFE should treat all originator transactions the same.
4.NAMB supports making the GFE form mandatory. However even with this necessary change, the proposed GFE continues to make a distinction between broker transactions and lender transactions, which as stated above hurts borrowers. a. The four page disclosure does not promote simplification and clarity for consumers.b. The GFE should look like the HUD-1. The proposed changes to reorganize the HUD-1 with numbers and names that correspond to the GFE is a step in the right direction, but not enough to aid consumers. c. The period during which the GFE terms are available to the borrower (10 business days) is too long. This will delay contracts and drive-up costs for consumers.
5.NAMB supports the change in the definition of “required use.” The new definition still allows for package bundling (an optional combination of bona fide settlement services at a discount rate); so long as consumers receive a better deal then if they purchased settlement services separately.a. However, we need to avoid any brightline test that sets a dollar amount higher than zero as a threshold for determining what constitutes an economic incentive or disincentive. The threshold for determining incentives and disincentives should be “any thing of value.” HUD should not consider the RESPRO bright-line test, which sets a dollar amount threshold for determining economic incentives / disincentives.
6.As proposed, the current GFE will allow loan officers at lender’s to continue to sell against mortgage brokers by pointing out YSP and not disclosing that they too receive indirect compensation. Should HUD implement the proposed GFE, this practice by lender loan officers should be considered by rule as a deceptive trade practice. The FTC should have enforcement authority to prevent this scenario.