Below is Mr. Kittle’s oral testimony, as prepared for delivery.

“Chairman Watt, Ranking Member Miller, thank you for the opportunity to appear before you to discuss RESPA – one of the Mortgage Bankers Association’s top policy issues.  I would like to make three points and then I would be happy to answer any questions:

One: MBA and I, personally, are firmly committed to improving the mortgage process for both industry and consumers, and we have been for a very long time.

Two: any reforms should give consumers the information they need to effectively shop for loans, to inform themselves about the true cost of closing on a mortgage and to protect themselves from unscrupulous actors in the mortgage process.  That requires a comprehensive approach to the loan application and closing process, involving both HUD’s RESPA forms as well as the Federal Reserve’s TILA forms.

Three: HUD’s proposed RESPA reforms do not even come close to achieving simplification.  They should be delayed and officials at HUD should work with the Federal Reserve on a joint and comprehensive effort to simplify and improve forms and disclosures.

Improving the mortgage closing and application process will result in better informed customers who understand their loans and the loan closing process.  With greater transparency and better information, consumers will shop more effectively.  This will lead to better mortgage decisions, and those lenders who can objectively provide the best products for their customers will be the companies that get the most business.  The market will become more efficient; lenders will have better and happier customers.  Reform is right for the market and for consumers.

But reform for reform’s sake would be quite damaging to the system.  Reforms should achieve two inter-related goals:

• One: help consumers shop and
• Two: help them understand their loan and the closing terms better.

That’s why it is imperative that HUD not work in isolation on this issue, but work with the Federal Reserve in helping consumers shop for and understand their loan. 

The Fed is responsible for the rules implementing the Truth in Lending Act, or TILA.  HUD is responsible for RESPA.  At the time of application, borrowers receive a TILA disclosure and a “Good Faith Estimate” of closing costs.  In the middle of the process, recently passed federal law mandates another TILA disclosure.  Then at the closing table, the borrower gets yet another document, the HUD-1, which is different from the previous two documents.  All of these documents are ultimately confusing for the consumer.

You simply can’t compare one document to another without a map.

It is so confusing, HUD literally has created a map between its two documents.  How is this simplification?

Real simplification would look at all of the documents and harmonize them so that they work together.  Incredibly, this HUD RESPA proposal would actually make the forms less similar.  This is exactly what consumers do not need.

If you’ve purchased a home, you have some idea of how the closing process works.  Does anybody really believe that the way to fix the closing mess is to make a closing longer and to give more paper to customers?

What HUD has proposed would:

• Take what should be a one page form and make it four pages;
• Require a 45 minute script be read to the consumer, stretching an already long closing process, with no benefit to the 
   borrower;
• Continue to have a series of forms where the lines don’t match up and consumers can’t figure out what happens from one part
   of the process to the next.

MBA has long supported efforts to make the mortgage process simpler, clearer and more transparent for consumers.  Common sense dictates that HUD and the Fed work together.  The rules and forms should be harmonious, work for borrowers and be implemented at the same time to avoid confusion and unnecessary costs for lenders, sellers and buyers.

In closing, let me say that we all know that the context of this hearing is the larger situation in the mortgage and financial markets.  As you know, right now the market is fragile.  This is not the time to ask the industry or consumers to assume the costs of regulatory changes unless they are necessary and well conceived.

We need reform.  But we have to make sure we get the reform right.  We are pleased that HUD attempted a very difficult task.  They deserve to be commended for their efforts. 

Unfortunately, HUD’s efforts will not give consumers what they need. 

###

The Mortgage Bankers Association (MBA) is the national association representing the real estate finance industry, an industry that employs more than 280,000 people in virtually every community in the country. Headquartered in Washington, D.C., the association works to ensure the continued strength of the nation's residential and commercial real estate markets; to expand homeownership and extend access to affordable housing to all Americans. MBA promotes fair and ethical lending practices and fosters professional excellence among real estate finance employees through a wide range of educational programs and a variety of publications. Its membership of over 2,200 companies includes all elements of real estate finance: mortgage companies, mortgage brokers, commercial banks, thrifts, Wall Street conduits, life insurance companies and others in the mortgage lending field. For additional information, visit MBA's Web site:  www.mortgagebankers.org.