Lesson for the week: Never watch sausages, legislation, or Real Estate Settlement Procedures Act rules being made.
On Wednesday the Department of Housing and Urban Development held what was supposed to be the last of five sessions related to the act.
But the 18 members failed to reach a consensus, so they scheduled another session for May 20 and 21.
The members include 13 lawyers and represent agendas from every corner of housing finance.
The law, and especially its section 8, which deals with referral fees and computerized loan originations, has always been a touchy issue for the housing finance industry. The final section 8 rule, adopted in 1992, was deemed unacceptable by mortgage lenders and consumer advocates alike; they said it was not specific enough.
The rulemaking board was formed to allow representatives of trade associations, consumer groups, and secondary market agencies to negotiate a replacement.
"We really want them to figure this out for themselves," said Sarah Rosen, special assistant to the assistant secretary of housing at HUD. "If they punt it down to us, it's just going to go to Congress."
And despite the disparity of opinion, progress has been made, she said. Early sessions concentrated on education, and by Wednesday's meeting, several rule proposals had been heard.
"It's been an educational experience for everyone," said JoAnn Carpenter, vice president and deputy counsel at the Federal National Mortgage Association. "Now if HUD could put it in plain English, and put it out ...."
Many proposals addressed the problem of "steering" - the practice of brokers' bringing borrowers to lenders from whom they are sure to make the most profit.
One proposal, which would have required disclosure of all fees paid by lenders to brokers, was opposed with bulldog-like intensity by David J. Shirk, president of the Oregon Association of Mortgage Brokers, and Laurence Platt, chief counsel to the National Association of Mortgage Brokers.
Using the analogy of a car dealer, Mr. Shirk argued, "You're saying that I would have to disclose not only the color and price of the car but what my profit margin is from the manufacturer."
Other ideas considered by the board included capping broker compensation, requiring federal licensing of mortgage brokers, and including a disclaimer in the broker-borrower contract, stating that a broker is not an agent of the borrower.
May's meeting is expected to refine these proposals. But a final rule will most likely be left up to HUD, board members agree.
"They're going to have to go back to the drawing board and play Solomon," said Mr. Platt. "It's just a question of where are they going to cut the baby."
