Secretary Martinez told members of the House Small Business Committee earlier this week that consumers will save some $8 billion dollars - roughly $700 per loan transaction - at settlement once the proposed reforms of the Real Estate Settlement Procedures Act (RESPA) become final. Martinez also said that RESPA reform would actually stimulate greater competition and business opportunities for small service providers.

HUD is currently in the final phase of the most sweeping reform of RESPA since the law was enacted in 1974. The final rule is expected to be completed this spring following a review by the Office of Management and Budget. For more information about HUD's proposed rule, visit www.hud.gov/offices/ogc/respa.cfm.

Last July, Martinez proposed three other changes to RESPA:

Requiring Greater Disclosure of Mortgage Broker Fees. When a borrower qualifies for a home loan with a mortgage broker, but lacks the cash to pay for the upfront loan origination and other settlement costs, the borrower may choose to pay a slightly higher interest rate in exchange for the lender's payment of some or all of these costs. The difference between the interest rate borrowers qualify for and what they end up agreeing to results in a lender payment to a broker that is often called a 'Yield Spread Premium.' Under current rules, these payments are not clearly disclosed to borrowers. Sometimes these payments simply serve to increase broker compensation. HUD is proposing that in brokered loans, these Yield Spread Premiums be clearly disclosed and credited toward the borrower's settlement costs.

Improving the Good Faith Estimate. Shortly after a person applies for a home loan, they receive something called the Good Faith Estimate from their lender that details their estimated settlement expenses. Today, this estimate is more like a Good Faith GUESSTIMATE. HUD wants lenders to provide consumers a more simple, clear and firm Good Faith Estimate, at no or nominal cost, so that they can better understand the charges and use it to shop for a home loan and service providers BEFORE they become so invested in the process that they can't back out. The new Good Faith Estimate would sharply limit lenders' ability to raise their charges at the last minute.

Removing Regulatory Barriers to Lower Costs. Current regulations inhibit the practice of offering consumers a single guaranteed package including the price for total settlement costs and a mortgage interest rate. Under Martinez's proposed reform, any entity would now be able to assemble and offer consumers "guaranteed mortgage packages" - a guaranteed mortgage interest rate and a guaranteed price for a complete package of settlement services. Consumers would know their ultimate costs in time to shop for the best mortgage product BEFORE incurring any out-of-pocket expenses and avoiding last-minute "junk fees" and other unexpected increases in settlement costs.