Under Heavy Pressure, HUD Backs Off Plan
The Department of Housing and Urban Development, under heavy pressure from the mortgage industry and its congressional supporters, abruptly decided last week to pull proposed reforms to the real estate settlement procedure.
HUD's proposals were aimed at simplifying and reducing closing costs for homebuyers by amending the Real Estate Settlement Procedures Act to allow federally regulated, fixed-rate guaranteed-cost settlement packages; and require companies to adhere more strictly to required "good faith estimates," of loan fees and settlement coats. HUD and the proposal's backers claimed the moves could have saved the average homebuyer about $700 on their closings.
But lenders and the multitude of related service providers, from title insurers to closing attorneys, feared the moves would cut into their profits. One of the fears was if major lenders could wrap all of the costs into a single package at a fixed price, it would force smaller companies that provide some of these services to reduce fees.