The Department of Housing and Urban Development is considering a rule intended to protect unsuspecting borrowers from erroneously thinking they are dealing with lenders that are somehow connected to Uncle Sam.

Many direct mail solicitors often use such terms as "national" and "federal" in their names to imply a government relationship in hopes of making people believe their often too-good-to-be-true offers are on the up and up.

But under the regulation being consideration by HUD -- but not yet printed in the Federal Register -- non-federally supervised lenders would be banned from using those and such other terms as "United States," "reserve," "deposit insurance" and other words and phrases that would make someone think there is a government connection.

HUD has the authority to propose the rule under a federal criminal statute which prohibits false advertising or misuse of names indicating federal agency involvement.

Also on the department's radar screen for 2005 is a rule that would allow the Federal Housing Administration to keep better tabs on lenders who originate and service government-insured mortgages.

The regulation would authorize HUD to establish a loan officer registry and a servicing approval agreement for FHA-approved lenders.

As currently envisioned, the clearinghouse would limit registration of a loan officer to one FHA-approved lender at a time and give the government the ability to monitor a loan officer and his movement from one company or location to another. The rule would provide for sanctions against loan officers for poor performance.

Often in the lending business, loan officers who are accused or found guilty of illegal or abusive tactics in one state simply pack up their bags, move to another state and go to work for someone else. Demand for experienced agents is such that other than making a few cursory inquiries, lenders rarely check the backgrounds of potential new hires.

In an apparent effort to make lenders liable for loan officers' misdeeds, the rule also would clarify that a loan officer must be an employee of a lender. In many shops, loan officers are paid commissions rather than salaries and, like similarly paid real estate agents, are considered independent contractors.

This particular rule also would create a servicing agreement that would require FHA approval.

The Department believes that the agreement would enhance its authority to supervise the servicing of FHA-insured mortgages and to take action against lenders and companies which administer loans on behalf on lenders who fail to perform required servicing functions such as working to keep late-paying borrowers in their homes.

More long term, HUD also hopes to restart its effort to improve the process for obtaining mortgages by rewriting the Real Estate Settlement Procedures Act, or RESPA. If that sounds rather familiar, it should -- HUD has been calling for new consumer protections for what seems like eons.

Characterized as "economically significant," the pending rule would establish a new framework for borrower disclosures under RESPA that would, among other things:

• Address the issue of mortgage broker compensation. HUD wants to specifically address the issue of lender payments to mortgage brokers by fundamentally changing the way in which their compensation is recorded and reported to borrowers.

• Significantly improve the good-faith estimate of closing costs and fees that borrowers are required to receive within three days of applying for a mortgage. In this regard, the government wants to amend the rules to make the GFE firmer and more usable, thereby making it easier for consumers to shop around for mortgages and avoid unexpected charges or changes at settlement.

• Remove regulatory barriers to allow lenders to provide guaranteed, one-price packages of settlement services.

For what it's worth, the exact wording of the changes HUD has in mind for RESPA are identical to descriptions put forth in previous regulatory agendas.

Published: January 12, 2005

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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.