To the surprise of practically no one and the relief of almost everyone, Acting Secretary Alphonso Jackson of the Department of Housing and Urban Development has yanked the Bush Administration's controversial proposal to reform the Real Estate Settlement and Procedures Act.

In taking back the proposed rule, Sec. Jackson said HUD remains "strongly committed to efforts to simplify, improve and lower costs associated with obtaining home mortgages."

But because of strong bi-partisan concern in Congress about the proposed changes -- which have yet to be revealed by HUD -- as well as solid opposition from nearly all quarters of the housing sector, he took the rule back from the Office of Management and Budget (OMB).

Yesterday's withdrawal was met with immediate and virtually unanimous applause.

"This is a great day for American consumers," said A.W. Pickel III, president of the National Association of Mortgage Brokers. And Kurt Pfotenhauer, senior vice president of government affairs at the Mortgage Bankers Association, called the move "a win for consumers and the housing industry."

However, Sec. Jackson had little choice. After he had sent the plan to OMB in mid-December, more than 250 lawmakers wrote the budget office asking that the proposal be returned to HUD for further review.

The lawmakers had threatened to delay Jackson's confirmation hearing, and it wasn't even his rule. It was the handiwork of his predecessor, Mel Martinez, who resigned to run for the Senate in his home state of Florida. But it was Jackson who sent the proposed rule along to OMB only a few days after Martinez stepped down.

Many housing organizations and consumer groups, including the American Land Title Association, National Association of Home Builders, National Association of Realtors, Consumer Federation of America, National Association of Consumer Advocates, National Community Reinvestment Coalition and the National Consumer Law Center, also have voiced concerns, not just with the rule's suspected content but also with the process by which it was issued.

Although the groups commended HUD's efforts to simplify the mortgage process, they asked that it not publish a final rule unless they got a second shot at it "in order to prevent harm to consumers, the housing industry and the housing markets."

The magnitude of the changes suggested by HUD, they argued, posed significant risks to the housing and mortgage finance systems. Therefore, it is imperative that HUD get the details of RESPA reform right the first time.

In his letter of withdrawal, Sec. Jackson said he believed it "prudent for HUD to reexamine the RESPA rule before it is made final."

He said he would revise the proposal "if necessary" and then re-propose it with requests for additional comments. HUD had received more than 40,000 comment letters on the original RESPA plan, the most on a single topic in the department's history.

"After the rule has had a complete vetting," he also wrote, "I will sent it back to OMB for review."

OMB, which was working on a 30-day extension of its review procedures when it received HUD's withdrawal notice, agreed with Sec. Jackson that the rule "would benefit from additional consideration."

When the rule was first proposed, the budget office sent HUD a post-review letter highlighting aspects of the rule that it believes required additional analysis. In particular, OMB said it was concerned with a Federal Trade Commission finding that new forms, intended to make more comprehensible lenders' estimates of loan costs, could be even more confusing to consumers than the forms they were intended to replace.

HUD has undertaken additional consumer testing as a result of the FTC findings. But, in its response to Sec. Jackson, the budget office urged the department to ensure that the final forms enhance consumer comprehension.

OMB, worried, as are many congressman, about the impact changes in RESPA could have on small businesses, also called on HUD to further refine its analyses of what the new rule would do to the origination and settlement service sectors.

In addition, it asked the housing agency to consider whether Federal preemption of state laws is needed to ensure that consumers receive the full benefits intended by the proposed rule. And it told HUD to expand its analysis of how various alternatives to package settlement services into a all-in-one-price option would facilitate comparative shopping and consumer savings.

HUD first proposed significant changes to the 30-year-old RESPA two years ago, with the aim of creating an incentive for settlement service providers to offer packaged services at a single price so that consumers could more effectively shop for the best deal.

Published: March 23, 2004

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When Lew Sichelman first started writing about housing in 1969, he was the youngest real estate writer in the country. Now, 37 years later, he's one of the oldest -- and most decorated. He has been rated the top housing columnist in the country by the National Association of Realtors as well as by his peers in the National Association of Real Estate Editors. Indeed, NAREE has recognized his work on numerous occasions. One year - due to his advancing age, he can't recall which one - he earned top honors in the annual NAREE Journalism Contest in three out of the four major writing categories. It was the first time one writer has won so many NAREE awards in a single year. Known for his ability to make even the most difficult topics understandable, Sichelman also has been honored by the National Association of Home Builders and the Mortgage Bankers Association. He began providing in-depth coverage of and consumer-oriented information about housing and housing finance at the Washington Daily News, where he was real estate editor. He held that same position for nine more years at the Washington Star, which purchased the News in 1972. The Star, a so-called "writer's newspaper" which also had the misfortune of being an evening paper, was put out of its misery in 1981, and Sichelman, who had begun self-syndicating his column in 1978, decided to become a full-time columnist. Today, his column, "The Housing Scene," is distributed by United Media to newspapers throughout the country. He also is on the staff of National Mortgage News, an independent newspaper which is considered the bible of the mortgage business. And he writes for numerous other publications, including MarketWatch.com, where he answers readers questions once a week, Sports Illustrated (don't ask), RealtyTimes.com, BigBuilder and others. Sichelman is married, the father of five and grandfather of eleven.