June, 2008
HUD'S MISSED OPPORTUNITY FOR POSITIVE CHANGE
A MESSAGE FROM THE ALTA PRESIDENT-ELECT MICHAEL PRYOR
Every Good Leader understands that for significant change to occur, there must be a climate that incubates that change. Every good leader understands that those special times…...those opportunities...are rare and must be used thoughtfully in order to have maximum benefit.
The Department of Housing and Urban Development's (HUD) proposed overhaul of the Real Estate Settlement Procedures Act (RESPA) arrives at a critical time of opportunity, but tragically misses the mark as a positive change agent.
I, along with many in our industry, had high hopes that HUD would take real measure of this special time of interest in the housing market and use this rulemaking opportunity in a very surgical and progressive manner to help simplify the closing process for consumers.
In my view, instead of simplification the proposed rule creates confusion. And rather than promote consumer choice, it will ultimately will limit consumer choice.
The implementation cost to small business is staggering. And it's not just the financial cost. The proposal places an enormous burden on the settlement agent to explain items and/or discrepancies that were CREATED by the lender. The sheer lack of forethought and understanding of the component parts of the settlement process is alarming.
In addition, the proposal provides a misguided marketing advantage to some players with the guaranteeds pricing structure for some of the settlement charges. The guaranteed pricing structure has been described as the discount store approach to lending and settlement,s largely because it is almost exclusively focused on price and concentrates the determination of that price into very few hands.
It is this concentration of choices that will ultimately betray the American consumer. The net effect of the guaranteed pricing structure will tilt the playing field away from small title companies and small lenders. Both will be unable to compare as the flight from quality at a fair price becomes a train wreck of highvolume title companies. As competition is driven away, the consumer will be left with fewer choices. Not only will the prices rise, but the consumer's ability to choose from a wide array of providers have been snuffed out by the very agency that was supposed to be protecting their ability to choose.
And, once again, the proposal forgets that for every buyer (that HUD purports to be protecting), there is a seller. The proposed rule acts as if the buyer is the only person affected by the process. During the last ill-fated rule discussion, the title industry repeatedly reminded HUD that many of the buyers were also sellers in a companion sale. HUD's new rule still does not exhibit any understanding of trading ups or the seller's role in the transaction.
This proposal does much more harm than good...to everyone. For every attempt to solve a perceived problem, the probability...the certainty...of unintended consequences loom large.
Every good leader understands that an opportunity for substantive change is rare. Every good leader understands that such a opportunity, when lost, is seldom recovered , but I fear HUD will cling to this ill-advised rule, preferring to pass something rather than taking the more difficult path of substantive change. The home buying process is too important to the American consumer and our economy to deserve such treatment. The opportunity for substantive change is not lost, but this proposed rule is wasting precious time.
