WASHINGTON - Do mortgage brokers need to tell their customers all the fees they receive from a bank?
Currently, the answer from the Department of Housing and Urban Development is yes. Failing to disclose the fees is tantamount to noncompliance with the Real Estate Settlement Procedures Act.
But HUD is trying to determine whether the rule should be changed and is considering forming a committee of outsiders to help.
"This is the issue of the year as far as Respa goes," said Glenn Gimble, a compliance specialist with America's Community Bankers.
In the Sept. 13 Federal Register HUD announced that it would be seeking comment on whether disclosure of "all charges imposed on the borrower," including any fees the bank pays the broker, is useful to the consumer. Comments are due by Nov. 13.
Those fees are now required to be reported on the Good Faith Estimate and on HUD-1 and HUD-1A fee-disclosure forms brokers provide to a customer.
Sarah Rosen, special assistant to HUD's Assistant Secretary of Housing, said the agency will name a committee in two weeks to determine what changes should be made. A 30-day comment period must be held on the make-up of the group before meetings can take place.
"This is sort of an experiment for us," Ms. Rosen said. "In the past, people have tended to think that HUD takes comment letters into a back room, makes a decision, and never lets anyone in on discussions."
The committee of 15 to 20 people would include representatives from trade associations, regulatory agencies, and consumer groups, Ms. Rosen said.
Mr. Gimble, who said he has been contacted by HUD about being on the rule-making committee, said that as long as the customer feels he is being treated fairly, the fee disclosure should not be much of an issue.
"If I were a customer, I would say 'Let the brokers get all the money they want as long as I get the best rate on my mortgage,' " Mr. Gimble said.
Brian Chappelle, vice president of government agency relations for the Mortgage Bankers Association, said he wasn't sure whether HUD would choose to change the rule. While at its heart the change is a compliance issue, it also has political overtones.
"It's hard for HUD to be against disclosures," Mr. Chappelle said.
Robert P. Chamness, president and chief operating officer of CFI Proservices, a Portland, Ore., compliance company, said HUD should continue to maintain full-fee disclosure for several years.
He said the size of the fees in question make their disclosure important to the customer.
"These are the biggest fees involved in these transactions," Mr. Chamness said. "Any customer is better off knowing the biggest fee in the mortgage."
