With new and meaningful changes to the Real Estate Settlement and Procedures Act now hitting the mortgage origination industry, HousingWire‘s Jacob Gaffney asks some important questions of Mark Phlieger, president and CEO of Columbia, South Carolina-based Avista Solutions. His company provides a suite of web-based loan origination systems, and he has led Avista since its inception in 2001. The RESPA deadline has passed, and as of Jan. 1, 2010, all lenders must be compliant. Is everyone up to date in your estimation, or are some still catching up? I think HUD’s 120-day “exercise of enforcement restraint” speaks to the fact that some lenders are struggling to comply with the new rules. Having an accurate Good Faith Estimate is not as simple as it sounds, as so much can happen from the time a loan application is taken until it closes. The big Wall Street banks should have the resources to get under compliance, but are smaller, more rural institutions finding special difficulties? Fortunately, technology can help a lot in this area. Loan origination systems (LOS) can shoulder the heavy lifting on RESPA, but they have to be compliant themselves in order for their users to be ready for the new law. The great thing about the new generation of web-based LOS systems is that they allow mid-tier and smaller lenders to be just as sophisticated as the big banks. So if the LOS is ready for the changes, the users just have to go through some fairly straightforward training and they are ready, too. Web delivery means that all the IT hosting and software updates happen centrally, and the lenders don’t have to worry about them. Recently, HUD removed the 1% origination fee cap on FHA mortgages because of the nature of the disclosed costs under RESPA. Do you foresee a new cap, and if so, what would it be, given your knowledge of the GFE and HUD-1 statements? It is really not possible to predict if we will see a new cap with any certainty. Consumer advocates will campaign for a cap if there are significant complaints as they should. However it is also important to assure that origination space remain competitive to insure the best offerings for consumers. Competition is fundamental in our economic system, and consumers won’t benefit in the long run if all the loans are made by a handful of mega-banks who can subsidize the point of sale with income from other business lines. Those who champion RESPA, say it will promote a streamlined system. Given how fundamental a change this is, when do you think the industry will see the fruits of this labor? A streamlined system will be good for everyone, and RESPA plays an important part in this by making the process better for consumers. If the conditions of the loan change during the process, redisclosure becomes necessary to avoid surprises at the closing table. Once again, fewer consumer complaints is the goal, and it is a valid one. Another way to streamline the process is to take advantage of direct linkages with FHA through the LOS system. A few systems out there, ours included, have invested in creating automated underwriting systems with integration to FHA TOTAL Scorecard to make the process of approving and insuring loans faster and easier. The fruits of those labors are available now. As for how well the RESPA changes work, that will take months after HUD starts enforcing the changes in April, so probably late in 2010. Write to Jacob Gaffney.
