New Mortgage Rules May Lower Costs

November 12 2008 - The Department of Housing and Urban Development announced long-awaited rules aimed at helping Americans shop for mortgages more effectively but said it lacks powers to enforce those rules.

The rules update requirements of the Real Estate Settlement Procedures Act, known as Respa, a 1974 law that sets standards for home-purchase transactions. HUD Secretary Steve Preston said changes were needed because “many people made uninformed decisions” in taking out loans. That, he said, has contributed to the nationwide surge in mortgage defaults.

HUD, which pushed ahead with the rules despite intense opposition from lenders and others involved in mortgage transactions, estimated that the changes will bring savings of nearly $700 in loan-closing costs for the typical consumer.

In a press conference, HUD officials conceded that they lack legal authority to penalize violators of the rule. Legislation would be required to give HUD those powers. But they said state and federal regulators of lenders and brokers can insist on compliance with federal rules and that the threat of class-action suits may keep lenders in line.

New Mortgage Rules May Lower Costs
by JAMES R. HAGERTY | Wall Street Journal