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August 2004
Index of all
past
Affiliate Corner columns
RESPA reform: Is it dead, wounded or alive and kicking?
By Richard Talley,
President, American Title Services
In a meeting with the American Land Title Association, HUD Secretary Alphonso Jackson reiterated his commitment to RESPA reform.
"I assure you that RESPA reform is not dead," Jackson said. "If you want a bill you have to have consensus." He indicated that he is ready to present a new or revised reform package as early as this fall.
Most experts agree with Jackson that RESPA reform is not dead. However, they also agree that there is a lot of work to be done before it can become a reality. In its March 22 response to HUD's letter withdrawing its RESPA rule, Office of Management and Budget (OMB) Administrator John Gram listed two issues of particular interest that HUD need address before resubmitting the rule. Gram asked HUD to explain its analysis of how various packaging alternatives facilitate comparative shopping and consumer savings and also noted that a host of state anti-tying, anti-affiliation and mini-RESPA laws present significant obstacles to packaging, stifle competition and diminish consumer saving. It is in this area of state law reform or federal law preemption that real change need occur before there is RESPA reform. In the mean time, THE GAME IS BACK ON!
Joint ventures, affiliations, partnerships and revenue sharing deals heat up on the wake of HUD's decision to withdraw its RESPA reform proposal. From coast to coast, business development executives whose livelihood in recent years depended on getting deals done from assembling settlement services JV's and/or negotiating revenue sharing arrangements are now back in business. And they are proposing even more aggressive solutions to allow the nation's mortgage, realty and settlement providers to participate in each other's revenue.
Just last week, Dana Capital joined the fray announcing bundled services. The model of choice is ABN Amro's "OneFee" program that provides a single price loan including all loan fees and settlement cost. The program is provided primarily through the Internet and, since January 2001, ABN has originated and closed in excess of 175,000 loans totaling more than $27 billion.
A consumer or loan originator logs onto ABN Amro's website and enters very basic information and within seconds, there is a list of rates and closing costs. For example, a quote would look like six percent note rate, 6 1/8 percent APR with closing cost of $505. The rate and cost are guaranteed of 45 days and are all inclusive of all charges. There will not be any surprises at the closing table. These one rate programs require significant capital investment in technology. Therefore, title companies and national lenders are leading the charge in these products.
At the RESPRO (Real Estate Services Providers Council), annual conference in March, attendees echoed the vision that affiliated business arrangements and packaged products are the future of the industry. The industry is evolving and becoming more consumer oriented. To that end, prices are dropping and closing times are being compressed.
Back in the 50's there was no MLS, no sharing of information. REALTORS® were very protective of their customers. If a home was for sale, a prospective buyer had to call or visit the listing office and submit a bid. Many transactions were listed and sold by the same person.
In the 60's the industry established the MLS system. A two way market place was established for REALTORS® to exchange information. In the 70's branding occurred and large companies expanded their footprint. In the 80's commission splits moved toward the 100 percent payout for the agent and less for the employing broker.
Now, is the dawn of the consumer-driven market place. The MLS is no longer private, just for REALTORS®. All listings are marketed on hundreds of websites. Consumers are shopping on their own and demanding more service for less cost. The success of for-sale-by owner programs is one such example.
The next wave of consumer demand revolves around the entire process. Consumers do not think around business segments, selling a house, buying a house, getting a mortgage, appraisal, title and closing. Rather, they view buying and selling a home as a single activity. It is one single event. The REALTOR® is the gate keeper. REALTORS® control or at least have the most influence over the process. The consumer wants a simplified process that includes the entire transaction.
To this end, builders have offered a packaged product for years. Tom Meyer, President of the Homebuilders Financial Network, echoed this sentiment at the RESPRO conference. "Builders are really in the business of providing new home ownership which now, by definition involves a bundle," Meyer explained. About 80 percent of customers who buy a home from a builder walk out with a mortgage loan and as part of that package, they also get credit, flood, appraisal, closing, title and other services. "It is a true one-stop transaction," Meyer concluded.
HUD's survey and ABN Amro's consumer focus group study reaffirm the consumer's desire for a packaged product. Consumers generally feel the mortgage process is at a rushed pace, the figures are always different and they never get clear information up front. They end up feeling abused and walk out of the closing feeling not feeling good abut the transaction. A single or itemized price schedule is not very important. A guarantee on the price single or multiple is the single most important factor. |
