Today, Senators Faircloth and Mack are co-chairing the second in series of hearings about the possibility of reforming Truth in Lending and the Real Estate Settlement Procedures Act. Today we shall hear from the agencies that administer Truth in Lending and RESPA, respectively: the Federal Reserve Board and HUD. I would like to welcome Federal Reserve Board Governor Laurence Meyer and Assistant Secretary for Housing, Nicholas Retsinas. I look forward to hearing their testimony.
Truth in Lending and RESPA were enacted to protect the American consumer from scam artists who were "ripping off' homeowners and home buyers. The purpose of Truth in Lending is to promote the informed use of consumer credit through meaningful disclosures. RESPA was enacted in the hopes of providing home buyers with meaningful disclosures of settlement cost, and to prohibit the payment of kickbacks during the closing process.
Nevertheless, here we are, close to thirty years after the first of these statutes was enacted, and we are still debating whether Truth in Lending and RESPA are serving their intended purpose. Specifically, we must ask: are consumers receiving meaningful disclosures?
Last year, Congress directed the Department of Housing and Urban Development and the Federal Reserve Board to look into ways of streamlining the disclosures. They have both indicated that in order to achieve this they would need statutory changes, and that regulatory amendments would neither materially improve disclosures or prove cost- effective. Nevertheless, problems do exist. I look forward to both Governor Meyer's and Assistant Secretary Retsinas' testimony. I trust that the expertise that the Fed and HUD bring to bear on these issues will assist this Committee in its consideration of the possibility of TILA/RESPA reform.
As part of the same legislation that required the Fed/HUD study, Congress passed a moratorium delaying HUD's rule on employer compensation to employees for referrals. I am very interested in hearing what progress HUD has made on this issue during the moratorium period.
Another area I am interested in hearing more about is the issue of so-called "yield-spread premiums." Questions abound. Is it HUD's view that these mortgage broker should constitute per se violations of RESPA? When, if ever should these payments constitute Section 8 violations?
HUD has yet to issue a statement of policy regarding Section 8's application to yield spread premiums. I hope HUD will share its insights and views, including any concerns that the agency harbors about this practice, with the Committee.
Hopefully today's witnesses can help us to better understand the current
sources of concern regarding these two laws, and whether Congressional
action is merited. I know that there is no simple answer to the problems with
TILA and RESPA. I commend our co-Chairmen for taking on these most
difficult issues and I look forward to the testimony of our distinguished
witnesses. Together they should help to determine what, if anything, must
be done to amend these two laws.
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