2004 Year in Review

Manzullo: HUD's RESPA Rule

Don Manzullo

(WASHINGTON) House Small Business Committee Chairman Don Manzullo (R-IL) today said a proposed federal housing regulation could put thousands of small real estate settlement companies out of business while squashing competition and eventually raising costs for home buyers seeking financing.

Manzullo, who held his second Small Business Committee hearing on the issue this morning, said the proposed changes to the Real Estate Settlement Procedures Act (RESPA) unfairly give mortgage lenders the ability to bundle support services when offering home mortgages. Homebuyers would receive a bundle of packaged services when seeking financing without the ability to substitute support services, such as title searching, appraisals and pest inspections. The large mortgage lenders would eventually push the small real estate companies out of business and grab a monopoly in the home-buying industry, increasing costs to home purchasers.

At a hearing last spring, Manzullo asked U.S. Housing and Urban Development Secretary Mel Martinez to conduct a revised Regulatory Flexibility Act (RFA) analysis -- required whenever a federal agency proposes new regulations -- to determine the estimated impact the rule would have on small real estate businesses. HUD conducted a cursory RFA analysis, which indicated the regulation would cost small businesses between $3.5 and $5.9 billion. The initial analysis lacked details on the specific small real estate industries that would be harmed and failed to consider viable alternatives, which could reduce the damage to small businesses. Manzullo was joined by the National Federation of Independent Business, the U.S. Small Business Administration's Office of Advocacy and the U.S. Office of Management and Budget (OMB) in seeking a more detailed RFA analysis.

HUD never responded to the Small Business Committee's request for a revised RFA analysis. Instead, HUD has pushed forward in secrecy. Last month, HUD forwarded its final RESPA proposal to OMB for confidential review. John Graham, Administrator of OMB's Office of Information and Regulatory Affairs, testified today that his office is reviewing the final HUD rule. The OMB has until mid-March to approve the proposal or send it back to HUD for further analysis. If OMB approves the rule, HUD is free to implement it.

Manzullo urged HUD to withdraw the final rule from OMB and instead publish a new rule, which would give the public time to review and comment on any revisions HUD may have made to its original proposal. Furthermore, Manzullo urged Graham and his OMB colleagues to carefully consider the ramifications of the RESPA proposal on America's small businesses during the review.

"The continued existence of tens of thousands of American small businesses is at stake depending on HUD's revisions to its initial proposal. Unfortunately, HUD will not put forward its final proposal for public review until after it is approved by OMB and ready for implementation. That's too late," Manzullo said. "This flawed strategy by HUD will prevent the affected small businesses from helping HUD mitigate any potential damage to their industries. In addition, it will invite lawsuits, which will cost U.S. taxpayers millions of dollars to defend. In the end, it could cost thousands of American jobs, and that is extremely unfortunate and unnecessary."

by  Editor, theCity1.com
January 7, 2004