Home closing reforms delayed

Fixed-settlement proposal is withdrawn by HUD

Measure to be re-examined

Plan likely to re-emerge after criticisms addressed

March 23, 2004|By Tracy Swartz | Tracy Swartz,SUN STAFF

The Department of Housing and Urban Development withdrew its plan yesterday to simplify the mortgage-closing process and lower settlement costs for homebuyers.

The White House Office of Management and Budget had been reviewing the HUD plan to reform the real estate act that has regulated mortgage disclosures and settlement costs for 30 years. But HUD asked that the review be abandoned.

The OMB had been expected to release a decision on HUD's plan next month.

The proposal has drawn criticism from many members of Congress and mortgage professionals, who predicted the changes would reduce competition and increase mortgage costs in the long-term.

Federal housing officials had said their proposal for lenders to offer fixed-settlement packages could save homebuyers an average of $700 in closing costs. The plan, first offered nearly two years ago, was championed by President Bush as a way to make homebuying less complicated.

"This has a far-reaching, wide impact, and that's why we feel so strongly we must take the comments ... before finalizing the rule," acting HUD Secretary Alphonso Jackson said in a conference call yesterday.

Jackson said HUD will re-examine its plan, receive input from industry leaders and consumer advocates, then re-propose the rule. There is no timetable on the release of the new rule, Jackson said.

The previous rule looked doomed last year when HUD Secretary Mel Martinez resigned. But the Bush administration pushed for the reform, and the OMB was set to release the specifics of the plan in mid-April, a month's delay from the original release date.

An OMB official wrote in a letter yesterday to Jackson that his agency had not finished reviewing the plan. But he recommended that HUD analyze its packaging of mortgage costs and its changes to forms that require lenders to provide estimates of the closing costs within three business days of the loan application.

Some criticism focused on the proposal that fees for services such as title searches and appraisals be lumped together - a step that could make hiding some costs easier and the process even more confusing to consumers.

"We believe the [Real Estate Settlement Procedures Act] reforms are promising, but agree that the rule would benefit from additional consideration," wrote John D. Graham, head of the OMB's Office of Information and Regulatory Affairs.

Meanwhile, Sen. Wayne Allard of Colorado is withdrawing his hold on Jackson's confirmation, a spokesman said yesterday. The Republican senator said last month that he would not support Jackson's nomination to the secretary post if HUD issued its reform plan without listening to Congress or the public. Jackson yesterday denied that the confirmation was tied to his agency's decision.

"Clearly, I think that it's incumbent on us to look at this [in depth] and take the comments," Jackson said.

Democratic Rep. C.A. Dutch Ruppersberger of Baltimore County said he backs HUD's decision to withdraw the plan for further review.

Ruppersberger was one of more than 200 lawmakers to sign a letter last month urging HUD to review the reform.

Members of Congress expressed concern that the housing group was rushing to finalize its plan and not considering comments from consumer groups, real estate and mortgage agencies or the public. Forty thousand public comment letters about the rule were sent to HUD, according to the congressional letter.

"HUD is right to take a `time out' on this one," said Rep. Judy Biggert, an Illinois Republican who sponsored the letter to OMB. "We all support simplifying the real estate settlement process, so long as it helps rather than hurts consumers."

Realtors and mortgage professionals also applauded HUD for pulling its plan.

Mary C. Antoun, chief executive officer of the Maryland Association of Realtors, said the plan would have increased consumer costs and limited their mortgage choices. "It was very poorly conceived from the outset and there was no economic justification for it," Antoun said.

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