When Grant E. Mitchell was asked to write rules to implement the Real Estate Settlement Procedures Act, he thought it was going to be a fairly simple task.
Eleven years later, Mr. Mitchell, senior attorney for Respa at the Department of Housing and Urban Development, is still at it.
It's his unenviable job to navigate between large and small lenders, who - predictably - want different things. As the only person at HUD working full-time on settlement-act rulemaking, he gets 50 phone calls a day on the requirements - mostly from bank compliance officers.
"The thought of this being a nice quiet job - the phone ringing occasionally, having time to reflect at your leisure - long ago disappeared," Mr. Mitchell says.
The biggest disruption may still lie ahead. Although the rules appear to be reaching completion, Mr. Mitchell faces the prospect that some or all of his work will be scrapped.
A few weeks ago, a bill was proposed in Congress that would shift responsibility for the act from HUD to the Federal Reserve Board. Washington has also been buzzing about eliminating HUD entirely. Though the Fed could build on Mr. Mitchell's work, it also could decide to start over from scratch.
Mr. Mitchell, a bearded man of 58, declines to discuss these possibilities. Instead, he remains focused on the daily challenge of explaining Respa to anyone who asks.
"I don't think everybody fully understands" the law, Mr. Mitchell says. "In fact, I'm sure they don't."
The settlement law, enacted in 1974, was designed to prevent kickbacks among people involved in real estate settlements, including banks, real estate agents, attorneys, and title companies.
It also requires detailed disclosures to customers, including information about the servicing of the loan, an estimate of the amount of money the borrower will have to pay at closing (known as the "good-faith estimate"), and a copy of HUD's booklet that explains the settlement process.
Bankers face criminal liability for violations: a fine up to $10,000 and one year in jail.
In spelling out the rules, Mr. Mitchell has made considerable headway in the past few years. The main rules were published in 1992; others that came out last year pulled junior liens under the law and required a certain accounting method for escrow accounts.
The major issue still up in the air is a rule that would clarify how banks can use so-called computerized loan origination systems, or CLOs. Mr. Mitchell expects those rules to be finished this summer.
CLOs are mortgage origination networks that link lenders to realty brokers by computer terminals. While the technology can help homebuyers get faster approvals, critics say the link may encourage kickbacks for customer referrals.
When Mr. Mitchell was assigned the Respa project, his first move was to read the law.
"It didn't look that complicated - it was only about 20 words," he recalls. "So I said, 'Surely we can write a rule that can cover this thing.'
"That was 1984. I was to learn more."
The law, designed to protect consumers, quickly became a divisive issue within the housing finance industry.
Large nationwide lenders have sought to use the settlement act to forge close ties to realty brokers and their customers. Smaller lenders and brokers, meanwhile, have struggled to make sure the law doesn't cut them out of important business dealings.
Last year, HUD says, 90% of the Respa-related complaints it received about lenders' actions came from other lenders, not consumers. And that's saying a lot. HUD received some 12,000 requests for information or complaints under the law, according to David Williams, the agency's director of settlement-act enforcement. HUD investigated 500 cases and closed 195, he says.
"There are always several different interest groups who care," Mr. Mitchell said. "They care a lot, because its their livelihood."
That controversy is the main reason, said Mr. Mitchell, that the rulemaking has dragged on so long.
After an unsucessful attempt to get the Supreme Court to clarify the act, HUD started issuing a series of interpretive letters that eventually numbered over 300. The best-known was called the "Citicorp letter."
Citi was not heavily involved in the mortgage business but wanted to expand in it by working closely with realty brokers. HUD's letter gave Citi the go-ahead. Almost overnight, Citicorp became one of the largest mortgage lenders in the country, originating $12 billion of home loans in 1987.
"The rest of the industry stood up and took notice," Mr. Mitchell said.
At that time, the only guidance on what Respa permitted was the letters. Mr. Mitchell looks back on those days a bit regretfully.
"This business of doing one thing at a time was bad," he said. "It was bad government, a bad way of doing business. It's much better to have rules that apply to everybody."
The latest rules, which take effect May 24, will require banks to use "aggregate accounting" for escrow accounts. This approach is supposed to protect borrowers by making sure lenders don't overcharge them by holding too much money in escrow.
Attorneys general of several states had complained that lenders can collect more money single-item accounting because they account for each escrow item separately. "It was felt that there was too much free money in the hands of the servicer," Mr. Mitchell said.
Software companies are barraging Mr. Mitchell with calls on this issue, trying to change their systems to meet the rules. Bankers also are calling, he said, but more to understand than to complain.
After he finishes the last rule, Mr. Mitchell hopes to pen something of a Respa epic - a commentary pulling together the myriad rules and helping the industry to finally understand them.
In the meantime, he will keep fielding the daily onslaught of phone calls. He only hopes that bankers don't find his E-mail address.