In a surprising and hastily-called media conference, Housing and Urban Development Acting Secretary Alphonso Jackson announced to reporters that HUD is withdrawing the RESPA reform rule it had proposed which was undergoing review by the Office of Management and Budget (OMB.)

The OMB, which operates by Executive Order from the President of the United States, had put off its decision to accept, reject or send the rule back to HUD for further deliberation until April 14th, 2004, due in part to a barrage of letters and comments by groups as diverse as members of Congress, the Federal Trade Commission, Small Business Administration, the National Association of Realtors (NAR) and other industry groups, and consumer groups that they had not had enough time to review the rule and make comment.

The RESPA reform rule as proposed by HUD was designed to change the way real estate closings are done through guaranteed mortgage packages (GMPs) among other revisions. A pet project of former Secretary Mel Martinez, RESPA reform was enthusiastically embraced by the Bush administration nominee for Martinez' replacement, Jackson.

However, in lieu of an unprecedented outcry by Congressional leaders, industry leaders and consumer groups, Jackson said he felt that while it was a priority to simplify the homebuying process and improve the closing costs associated with settlements, that it is "critical to make changes carefully."

"I've heard from members of Congress, industry and consumer groups," said Jackson, "and based on what I've heard, HUD is withdrawing the RESPA rule and will reexamine it, and we plan to repropose it after we have had the opportunity to meet consumer, industry groups and Congress."

Jackson also suggested that based on comments, he may revise the rule.

One question that intrigued reporters was timing, who repeatedly tried to find out from Jackson why, after the rule has been around for almost two years, all these groups objected on the grounds of not having time to review and comment on the rule. The HUD had submitted the proposed rule in December 2003, but the HUD was secretive about what it had proposed, or whether there had been changes to the original proposal that was introduced almost two years ago, which touted a single-package closing overseen by lenders. Many service providers, from Realtors to title companies, preferred to see the HUD adopt a two-package system that would allow consumers better oversight over lenders and their costs by separating them from title and closing companies and their costs.

Some speculate that Jackson's decision to scrap the rule had something to do with the hold on his confirmation in Congress, but he denied that. Then what was the reason the rule was suddenly withdrawn?

"I was nominated as Secretary and I am going to run the agency as I see fit," Jackson said. "There are many groups concerned that they have not had a chance to see the changes that have been made to the rule since it was proposed two years ago. They deserve to see those changes."

One question that wasn't asked was that if the rule is going to affect millions of people from consumers to service suppliers, why was and is the proposed rule so cloaked in secrecy?

When asked about the sections of the rule that may require review and revision, Jackson was mute. "We're limited to what we can say about the substance of rule," he told reporters more than once.

Jackson offered no timetable for how long it would take to reexamine, revise or resubmit the rule. "We have to consider the OMB comments and meet with Congress," said Jackson, "and I want to take the time to listen to those affected with this rule."

Industry and congressional leaders wasted no time in applauding Jackson's actions.

A relieved Walt McDonald, president of the National Association of Realtors made this conciliatory comment: "We look forward to continuing to work with Alphonso Jackson, acting secretary of the U.S. Department of Housing and Urban Development, and the administration on efforts to reform RESPA.

"On this regulation Congress acted to fulfill its responsibility to review the proposed regulation to ensure that it met the test of congressional intent. More and more decisions affecting millions of homeowners are being made at the regulatory level today. It's important that Congress continue to actively oversee the regulators.

"Sen. Wayne Allard, R-Colo., and Reps. Judy Biggert, R-Ill., Ruben Hinojosa, D-Texas, and Don Manzullo, R-Ill., as well as the more than 250 members of Congress who weighed in on this issue deserve the gratitude of all Realtors for the leadership they showed."

House Small Business Committee Chairman Don Manzullo (R-IL) "hailed the Bush Administration for scrapping a proposed federal housing regulation that could have put thousands of small real estate settlement companies out of business while squashing competition and eventually raising costs for home buyers seeking financing."

Manzullo, said a press release, who held two Small Business Committee hearings on the issue, said the proposed changes to the Real Estate Settlement Procedures Act (RESPA) unfairly gave many giant mortgage lenders the ability to bundle support services when offering home mortgages. Home buyers would have received a bundle of packaged services when seeking financing without the ability to substitute support services, such as title searching, appraisals, surveys, pest inspections, real estate and brokerage services. The large mortgage lenders would have eventually pushed the small real estate companies out of business and a grabbed a monopoly in the home-buying industry, increasing costs to home purchasers, said the release.