FTC: Broker Comp Proposal Confusing

The Department of Housing and Urban Development should drop its proposal for disclosing mortgage broker compensation, according to the Federal Trade Commission, because testing shows that the disclosures are confusing to consumers.The FTC conducted tests with 500 consumers and found that the broker compensation disclosures made it difficult for the consumers to identify the less expensive loan option. "The study concludes that consumer confusion and mistaken loan choices arising from the compensation disclosure are likely to increase mortgage costs for many consumers," the FTC said. The FTC submitted its study to HUD back in October, but just released it publicly on Feb. 27. Since HUD first proposed its Real Estate Settlement Procedures Act disclosures in July 2002, the National Association of Mortgage Brokers has complained that the disclosures would be confusing and unfairly single out brokers, because banks and other retail lenders wouldn't have to disclose the compensation they pay to their loan officers. "The FTC report clearly supports the points NAMB made all along," NAMB president A. W. Pickel III said. He also said the FTC study is another reason why HUD needs to step back and re-propose the RESPA rule so everyone can see if it will work. HUD is on track to issue a final RESPA rule, but the department and the Bush administration are under a lot of pressure to re-propose the rule for another public comment period.