RESPA and TILA Reform
Attorney
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David G. Kittle, Chairman-elect of the Mortgage Bankers Association and President of Principle Wholesale Lending, Inc., testified before the House Committee on Small Business.
Mr. Kittle told the committee that it is crucial that any new RESPA rule eliminate confusion and simplify the mortgage process for consumers while not causing undue hardship for small businesses.
Below are selected excerpts of Mr. Kittle's testimony:
Since HUD last issued a RESPA rule in 2004, the real estate market has experienced an unprecedented crisis, resulting in severe hardship for consumers and businesses alike. This crisis has many causes and victims. The causes range from economic conditions, to real estate prices to outsized investor and borrower appetites.
The victims include borrowers, but more than that, future borrowers, communities and the economy at large. While MBA does not believe that the lack of transparency in the mortgage process is the main cause of borrower difficulties, or that its improvement is the only solution, greater transparency could help stem abuses.
The sheer volume and complexity of disclosures today allows abusers to hide in plain sight. Long before the current market crisis, MBA supported simplification and greater financial literacy. MBA believes that problems in the industry are a good reason to redouble efforts in both of these areas [. . .]
The forms that borrowers confront today include the Truth in Lending disclosures, which detail the costs of credit, and the Good Faith Estimate and HUD-1, both of which detail settlement costs. These forms are required under TILA and RESPA.
Consumers need to get a clearer, simpler set of forms than these. So any changes to TILA forms, which are the Federal Reserve’s responsibility, and the RESPA forms, which are HUD’s, should happen together. Otherwise, additional costs associated with implementing new forms and procedures will fall on consumers and small businesses. In other words, reform should happen comprehensively, rather than piece-meal [. . .]
The RESPA Rule released by HUD is not simplification. Consumers need a full reform of the disclosures they see, including both RESPA and TILA that helps them quickly and effectively navigate the mortgage process.
Public policy should help ensure that the problems we see in the market today do not happen again. Reforming the mortgage process is an important but difficult task. It is imperative that we get this right.
