The Consumer Bankers Association has appealed to the Department of Housing and Urban Development to create an exemption of home equity lines of credit and commercial loans in the embattled Real Estate Settlement Procedures Act, citing among other reasons a bevy of redundant requirements.
The association called for a number of exemptions, including freeing home equity loans from Respa's disclosure requirements.
A key point of contention in the case of home equity loans is the proposed requirement of a special information booklet for refinancings. CBA disagrees with the provision allowing Congress to require a booklet for nonpurchase money transactions -- or refinancings.
"The proposal would allow lenders to avoid providing the HUD Settlement Book for refinancings and subordinate lien transactions," the trade group said in its letter, "and most home equity credit lines fall into the latter category. CBA supports this position [because] the current book is clearly innappropriate for transactions that are not for the purchase of real estate. Requiring its use would merely confuse the consumer.
"There is no reason to request clarification of congressional intent, as HUD has proposed," CBA continued, "in order to determine whether an appropriate booklet should be devised. Had Congress intended to require a special information booklet in the case of nonpurchase money transactions, it would have done so."
The servicing transfer disclosure required by Respa shouldn't apply to home equity credit lines because there is virtually no secondary market and, therefore, the provision is of little or no value.
The letter also cited the fact that there is almost no secondary market for home equity credit lines, making the servicing transfer disclosure of little or no value. The Regulation X-required good faith estimates are redundant, the trade group's letter said, because Regulation Z already requires it.
In addition, it pointed out that the HUD-1 settlement statement, even as revised, would be inappropriate because, unless the creditor requires payoff of other obligations as a condition of opening a home equity credit line, there are usually no disbursements for it.
Four Regulation X Respa provisions have been disputed widely. These control an employer's payment to employees for referral fees, payment for computerized loan origination services, state laws or regulations governing controlled business arrangements and written disclosures of controlled business arrangements.
The disputed provisions have drawn fire from trade groups, mortgage lenders and real estate firms, all of which believe they have much to lose -- or win -- depending on the results.
HUD is accepting comments on the four Regulation X provisions until Thursday, Aug. 5. It will hear arguments on the subject Friday, Aug. 6.
