How well is RESPA working?

Two years after passage of the Real Estate Settlement Procedures Act, the Department of Housing and Urban Development is asking leaders and borrowers to evaluate its performance and to make suggestions for change. RESPA requires advance disclosure to the borrower of the various costs involved in buying a house. It also eliminates certain kickbacks and referral fees for various settlement services, and reduces the amounts buyers are required to put in escrow for taxes and insurance.

HUD would like to know if its required settlement statements and its booklet, "Settlement Costs and You," which a lender must give a homebuyer, are accurate, timely and helpful, or if they are confusing. HUD would also like to know if the required one day's inspection before settlement provides buyers adequate notice of the total amount of money needed to go to settlement.

When RESPA was orginally passed, the banking industry voiced objections about the paperwork and the costs involved. How can these be effectively reduced? Consumers and their advocates have criticized RESPA for not providing penalties against lenders who mislead borrowers in their advance "good faith estimates" of mortgage loan charges. Under present law HUD can only advise persons who believe they have been deceived to hire an attorney.

The cabinet department is seeking an opinion on whether present regulations, which do not deal with title insurance or escrow limitations, should be extended. Comments on any other area, including how HUD is administering RESPA, will be considered in making regulation changes and in recommending legislation.

To complement this informal survey, HUD is contracting for two professional studies on RESPA. The first will examine model land title recordation systems, using refinements like a parcel index system - instead of recording under the owner's name - and a central office for recordation. The object is to make information retrieval simpler and cheaper through the use of computers and micrographics.

The second study, due on Capitol Hill by June 1980, will examine recommended changes in RESPA law.