- The Washington Times - Saturday, March 15, 2008

ASSOCIATED PRESS

Prospective home buyers would get easier-to-understand information on mortgage terms and save an estimated average of $700 in closing costs under a proposal unveiled yesterday by President Bush.

The proposed overhaul to a 1974 law requiring lenders to give what’s called a “good faith estimate” is aimed at making it simpler for consumers to make comparisons when they shop to buy a house or refinance a mortgage.

It’s the latest in a series of White House initiatives to help end a housing market crisis that has stalled the U.S. economy and sparked a global financial market turmoil.

“These mortgage agreements can be pretty frightening to people,” Mr. Bush said in a speech on the economy. “There’s a lot of tiny print. … One thing is for certain: There needs to be complete transparency.”

The mortgage broker industry is expected to oppose the proposal because it also calls for lenders’ payments to brokers, known as yield-spread premiums, to be disclosed to borrowers before they go to settlement.

Brokers receive the premiums for steering customers toward certain lenders although consumer advocates argue that the practice prevents consumers from getting the most competitive interest rate and loan terms on mortgages.

About 12.5 million Americans buy or refinance a home each year. The Department of Housing and Urban Development’s proposed revision to the 34-year-old Real Estate Settlement Procedures Act would mandate a federal disclosure form to be given to consumers who refinance a mortgage or borrow to buy a home.

The form is simpler than private-industry disclosure forms, which can vary widely state by state. It includes a summary of loan terms, interest rate and monthly payment, whether the interest rate and principal balance can increase and by how much, whether the loan has a prepayment penalty or balloon payment, settlement costs and other details.

HUD tested the proposed form over several years, which allowed consumers in nearly every instance to better compare home loan terms offered by different lenders, agency officials said.

After a 60-day public comment period, the HUD proposal could go into effect in the fall or later.

“Buying a home can be very intimidating. Consumers have had no assurance that the loan terms and closing costs they are offered will reflect what they confront at the settlement table, and that’s been one of the factors driving the current housing downturn. Our proposal fixes that,” HUD Secretary Alphonso R. Jackson said in a statement.

Yesterday’s proposal follows recommendations made Thursday by Treasury Secretary Henry M. Paulson Jr. to regulate mortgage lenders more strictly, all part of a broad federal effort to encourage recovery in the beleaguered housing market.

Mr. Paulson’s proposal covers regulations for mortgage lenders and other financial institutions as well as investors, regulators and Wall Street credit-rating agencies.

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