Real Estate Settlement Procedures Act (RESPA)
The Department of Housing
and Urban Development (HUD) issued a proposed rule on March 14, 2008, identifying
its primary goals for RESPA reform:
simplicity, clarity, transparency, and greater certainty of costs to
consumers.
In
response to the rule proposal, ARDA and approximately 12,000 other
parties provided comments on the proposed rule to HUD. ARDA submitted
comments on three specific issues of interest to the timeshare industry:
(1) the requirement that the GFE be available until 10 business days
from when the GFE is delivered to a borrower, which creates an
impression that a mortgage loan closing could not occur before the end
of that 10 business day period; (2) the content and form of the GFE; and
(3) the requirement that the closing agent or other person conducting
the closing read a “closing script” to borrowers. ARDA
explained in its comment letter the differences between the purchase and
finance of timeshares from traditional real estate products and alerted
HUD to the fact that many of the disclosure requirements did not make
sense as applied to the sale or financing of timeshare interests because
there is no delay between the time a loan application is completed by a
borrower and the time the purchase and loan documents are executed. ARDA
further advised HUD that the delivery of the GFE, Special Information
Booklet, and Mortgage Servicing Disclosure Statement, as required
by RESPA, take place
within a few minutes of the delivery of the HUD-1. Accordingly, the
settlement costs listed in the current version of the GFE would be
identical to the costs listed on the HUD-1 with no
“surprises” to the borrower.
HUD ignored
requests by more than 50% of the members of the House of Representatives
to block the Final Rule and rejected pleas by others to work with the
Federal Reserve Board to coordinate consumer disclosure efforts. HUD,
nevertheless, went forward with its release of the Final Rule. In
response to widespread objection, the Final Rule, consisting of 341
pages, eliminates the requirement for the preparation and reading of a
Closing Script. However, none of ARDA’s concerns regarding the GFE
were addressed in the Final Rule.
Commencing on January 1,
2010, the Final Rule will now require
the use of a standardized three page GFE and a revised HUD-1 containing
an additional page that allows consumers to compare their final loan
terms and closing costs with those listed on the GFE. In addition, HUD
stated in the proposed RESPA reform rule that it intends to seek
statutory modifications requiring delivery of the HUD-1 to the borrower
three days prior to closing. HUD officials have reiterated this intent
with the release of the Final Rule. If HUD attempts this legislative
change, this advance delivery requirement could adversely impact the
timeshare industry’s method of sale and finance of timeshare
interests. While there are many significant issues on the new
Administration’s agenda in 2009, ARDA continues to monitor
HUD’s activities in this area.
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