Respa, like an alien in a really bad horror movie, is a monster that just won't die.
Sarah Rosen, special aide to the assistant secretary of the Department of Housing and Urban Development, addressed about 100 anxious listeners Tuesday about the latest efforts to clarify rules enforcing the Real Estate Settlement Procedures Act. Unfortunately, the session at the annual conference of the Mortgage Bankers Association of America left more questions than answers.
Respa was enacted in 1974 primarily to halt loan-referral kickbacks, but confusion is rampant regarding how the law is actually enforced and what it defines as an illegal referral fee.
Paul A. Mondor, a director of the trade group, said the time has come to clarify Respa once and for all. "People have said that Respa is the MBA's Vietnam," he said. "Perhaps finally we can have peace with honor in our time."
Ms. Rosen, who has been working on Respa issues at HUD for a few years, said the industry must start to think about alternatives to this law.
One idea she said she had heard discussed in the industry is making lenders the single purchasers of settlement services. Another option would be to take current Respa guidelines and apply them only to bar referral fees to people "in a position of trust" in the lender-borrower relationship.
Another concept she said has been discussed is the possibility of setting up a self-regulatory mechanism similar to that for securities dealers.
Finally, she said, some people want to eliminate anti-kickback provisions altogether in favor of full disclosure of fees. This idea gives her "major heartburn," she said.
Ms. Rosen said the industry must decide whether Respa is the best it can come up with.
"If we had a blank slate, what would be the framework we would set out?" she asked her audience.
Earlier at the convention, incoming president Ron McCord had announced that a task force would be set up to deal with precisely that question. Mr. Mondor said the task force would meet next week with HUD and Federal Reserve officials and representatives of some consumer groups.
Exasperated mortgage bankers expressed their frustration to Ms. Rosen. The room erupted in applause after one pleaded with her for direction, saying guidelines should be black and white on what the most blatant referral violations are.
Ms. Rosen said HUD is setting up a Respa Web page to address lender and broker questions.
However, some audience members said a Web site would not suffice and that HUD should work more closely with state mortgage bank regulators. Many in the discussion said they had heard increasingly about loan kickbacks, especially in California.
One lender joked that the absence of clearly enforceable Respa rules actually contributes to violations. "I guess we're all trying to figure out what are the chances we'll get caught," he said.