have to be disclosed to borrowers, lenders told the government this week. But the banking industry is divided over a Department of Housing and Urban Development plan to leave this and other possible changes in real estate lending rules to a committee. Implementing the Real Estate Settlement Procedures Act has been a painstaking process for HUD. In September, the agency proposed changing its Respa rules to eliminate disclosure of indirect fees banks pay mortgage brokers. Most banks said these disclosures only confuse their customers, who don't care one way or the other anyway. Most banks also favored HUD's plan to classify a loan sale, at any point before, during, or after settlement, as a "secondary-market transaction" under Respa regulations. Such a change would exempt those loans from the rule. Bankers also argued that volume-based compensation should be permitted under Respa. If HUD agrees, lenders would be allowed to offer discounts to mortgage brokers that agree to buy a certain amount of loans in the future. Comments on the Sept. 13 proposal were due Monday. The vast majority of the comment letters received by HUD supported dropping the brokerage fee disclosure. But the industry's opinion was divided on HUD's novel suggestion that a committee be formed to help the government fashion a final rule. Some thought the group would ensure better regulations, but others saw the experiment as unnecessary bureaucratic wrangling. Input on the need for the rulemaking committee and on its makeup is being accepted until Nov. 24. Along with an official from the agency, HUD has nominated 14 people to serve on the committee, including representatives from trade and consumer groups, state and federal agencies, and national mortgage associations. Barring major changes in the list, HUD officials said the committee's first meeting should happen before Christmas. Disclosures drew most of the bankers' attention. Many banks said consumers didn't need to know about indirect fees, and that their disclosure only made compliance with the complicated rule more difficult. "We are not in favor of a disclosure of information that could be considered 'nice to know' especially when it creates a burden of additional workload to the credit union," wrote Frank E. Berrish, president of Visions Federal Credit Union, Endicott, N.Y. Becky Bockoven, lending compliance officer at American Federal Bank in Greenville, S.C., wrote that "most customers shop for the lender with the most competitive direct fees, and have no interest in the details of the loan sale transaction." Still, there were a few dissenters. Comerica Inc. wrote that disclosure helps the customer make a buying decision, and should be complete. The company also opposed forming the committee, saying the current comment process could be just as effective. However, several bankers said the additional consideration by industry experts would result in a more effective final proposal.

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