Dear Member of the VA-HUD Appropriation Subcommittee:
We understand that this afternoon Mr. Neumann intends to offer an amendment
to RESPA on the VA-HUD Appropriations bill. Representatives of homeowners
and consumers vehemently oppose this amendment because it undoubtedly will have
the effect of increasing the cost of financing homes. The cost of financing
a home will go up because more unearned fees will be paid in the financing process,
and this amendment eliminates the only effective remedy that most consumers
currently have for challenging illegal, unearned fees paid by lenders to mortgage
brokers.
This amendment does not provide clarity on the issue of whether lender
paid broker fees are legal. The only effect of this amendment is to cut off
class action relief for consumers whose loans are more expensive than they otherwise
would have been because of an illegal fee paid to a mortgage broker.
The issue of whether a fee paid by a lender to a mortgage broker is legal under
RESPA is complicated. HUD has proposed a comprehensive method of addressing
the issue, but the mortgage brokers don't like that resolution. In addition,
HUD and the Federal Reserve Board are just completing an extensive analysis
on how RESPA should be rewritten to better serve consumers and industry. Their
joint report is due to be presented to Congress in the next few weeks. The Banking
committees in both the House and the Senate are planning to examine these complicated
issues in a thorough fashion.
Passing Mr. Neumann's amendment at this juncture without any input from the
affected parties will cause considerable harm to millions of homeowners in the
United States. Attached is a copy of a letter signed by six major consumer organizations
opposing a proposal in the Senate that would have the same effect as Mr. Neumann's
amendment, and the explanations contained in it address Mr. Neumann's amendment
as well. Please do not pass Mr. Neumann's amendment to RESPA. If you
have any questions, please feel free to contact us.
