RESPA Rule Requires Upfront Comp Disclosure

The Department of Housing and Urban Development would require upfront disclosure of mortgage brokers' compensation in a proposed revision of the good-faith estimate the department is expected to send to the Office of Management and Budget any day now."Lender payments to mortgage brokers tied to the interest rate of the loan (yield-spread premiums) would be disclosed on the GFE because of the borrower's need to understand the trade-off between the upfront settlement costs and the interest rate," HUD says in an outline of the proposal that it used to brief key members of Congress Oct. 30. The outline obtained by MortgageWire says HUD's testing of the GFE shows that consumers could identify the cheapest loan 90% of the time whether the offer was made by a lender or a mortgage broker. The National Association of Mortgage Brokers has already pledged to oppose HUD's revisions to the GFE. The outline also shows that HUD will ask Congress to amend the Real Estate Settlement Procedures Act to require delivery of the HUD-1 settlement three days before closing and to provide for civil money penalties for RESPA violations. "A lack of enforcement authority and clear remedies for violations of critical sections of RESPA negatively impact consumers and diminish the effectiveness of the statute," HUD says.