Since 2002, the specter of the Real Estate Settlement Procedures Act (RESPA) reform has haunted the mortgage and title insurance industry, but like a monster under the bed, it always conveniently went away.
Now the rule changes are here, they’re real, and companies waiting for the reforms to disappear or be delayed are in for some real terror.
“We are implementing the final rule,” said Brian Sullivan, a spokesperson for the U.S. Department of Housing and Urban Development (HUD). “Our secretary said as much (in April). I don’t know what else to say.”
RESPA is governed by HUD, and hasn’t been changed in 35 years – until now. The changes in procedures will alter how every company involved in the process of selling homes interacts with each other, and with the consumer.
The updated procedures require new software to properly fill out the new forms and training on that software. But according to the companies that provide the software, the industry has been painstakingly slow in preparing for the change. The final date for the switch is Jan. 1, 2010.
Josh Weinberg, a business analyst at Calyx Software, said Calyx had software ready to go on Jan. 16, when the new HUD forms first became available for use, but very few companies asked for the upgrade.
“We are concerned just about the industry knowledge, and the industry awareness of the changes,” he said.
Weinberg said companies were have really only started to take this seriously in the last month.
“It is a massive endeavor with a very short timeline,” said Timothy Conley, vice president of sales and marketing at Softpro, another industry software provider. “We’re looking at this like the Y2K that nobody has heard about.”
Because the GFE, HUD 1 and HUD 1/A loan forms have changed, software companies have had to update, or create entirely new, software to match the new metrics.
Conley said mortgage companies that have been using the same forms for 35 years have been slow to adapt to the changes – if at all.
“There is a lot of training, and a lot of processes and procedures that need to be ironed out, and I don’t believe that at least from the settlement services side that any of that has been addressed nationally,” Conley said. “You can’t just hit a switch here and say, ‘OK, everyone knows what they’re doing.’”
Conley said Softpro has seen a recent bump in business, as companies face the fact that the changes will take effect.
Still Crying Wolf?
Kevin Cuff, executive director of the Massachusetts Mortgage Bankers Association, acknowledged that HUD might be serious about implementing reforms – this time – but he has been fooled before, and the reforms have died before.
Regardless, Cuff said the industry wasn’t really prepared for the RESPA reforms because of so many other state and federal regulatory issues, like division of banks regulation, net worth requirement, loan officer licensing, foreclosure prevention statutes and other state legislation, that require attention now.
“From where I sit, I think it is all turning into blind noise, because there is so much coming at the industry fast and furious,” Cuff said. “There is a whole heck of a lot of other things that everyone is dealing with right now.”
Cuff said that while he supported anything that promotes best practices for the industry, some of the proposed RESPA reforms are “really far reaching, and beyond the realm of common sense.”
“I understand this is prudent and important, but on the grand scale of things, it’s not until January,” Cuff said. “I think a lot of people in the industry are, for a lot of reasons, hoping for it to go away.”
