HUD plans mortgage rule changes

WASHINGTON — The Department of Housing and Urban Development is circulating to lawmakers proposed rules that would force lenders to make more accurate estimates of home mortgage costs, make disclosures easier to understand and reveal payments made to mortgage brokers.

The proposal is a toned-down version of changes put forward by HUD in 2002 but dropped two years later because of furious opposition from mortgage brokers and some lawmakers.

HUD oversees the Federal Housing Administration, the largest home buyer assistance program run by the federal government.

The rules would require lenders to provide a good faith estimate that lays out the terms of the loan, including elements such as balloon payments, prepayment penalties and other costs that may be involved in buying and maintaining a home.

The HUD plan would also require that a good faith estimate not change by more than 10% unless there was an unusual circumstance beyond the lender’s control.

The most controversial portion of the proposal would require any lender payments to mortgage brokers to be noted on the good faith estimate.

That figure is often dependent on the interest rate paid, with higher interest rates leading to higher payments to the broker.

It is similar to a 2002 rule change that angered mortgage brokers and got the proposals scuttled.

Marc Savitt, president-elect of the National Assn. of Mortgage Brokers, said he had seen the proposed rules and opposed them because of the required disclosure of payments to brokers but not payments to others involved in a home loan.

Under the proposal, the payment to a broker would be listed as a “credit to the borrower.”

Savitt said this would confuse consumers.