Respa News: Obama delays regulations: Will ‘required use’ go under the microscope?
The Obama administration sent a memo to the heads of all executive departments and agencies this week, notifying them that all proposed and not yet implemented regulations should be delayed pending review by the new administration.
According to K&L Gates Attorney Phil Schulman, the request will not affect the U.S. Department of Housing and Urban Development’s (HUD) final RESPA rule provisions, which took effect Jan. 16, since they came in under the 60-day phase in period. The review could open the door, however, to re-evaluation of the required use provision and the new good fait estimate (GFE) and HUD-1.
Obama’s order advised executive heads to “consider extending for 60 days the effective date of regulations that have been published in the Federal Register, but not yet taken effect…for the purpose of reviewing questions of law and policy raised by those regulations.” He further advised to reopen the comment period for 30 days on delayed regulations “that raise substantial questions of law or policy.”
Attorney Howard Lax of Michigan-based Lipson, Neilson, Cole, Seltzer & Garin said that as far as reopening the new RESPA rule for comment, “…the memo only says that agencies should ‘consider’ reopening the comment period. It does not mandate reopening the comment period. I expect that HUD will notify the OMB director that the rule does not raise any issues of ‘law or policy’ that are critical and/or the change in the disclosure format is critical for financial reasons and, therefore, the changes to the rule should be exempt from the directive.”
GFE and HUD-1
Schulman said that although possible, it was unlikely the administration would ask HUD to withdraw the GFE and HUD-1 portions of the regulation. He noted that the GFE and HUD-1 are already in a holding pattern as they don’t take affect until January 2010.
“They’re not that controversial,” Schulman commented. “The whole idea was to give transparency and clarity, and I think they do provide that. Could the Obama administration go farther? Require more consumer protections? I think it’s unlikely, given their priorities at HUD.”
HUD’s options
HUD has already agreed to a 90-day delay of the required use provision, giving the courts time to hear arguments in the lawsuit filed against HUD by the National Association of Home Builders. The court is fast-tracking that case to make a decision before that 90-day period runs out.
“As for required use, that is the unknown here,” Schulman said. “Right now HUD is scheduled to go back into court at the end of March to contest the motion for permanent injunction.”
Schulman said HUD will have to make a decision between four different options regarding “required use.”
“One is to fight, which would be to vigorously defend the Nov. 17 regulation on required use,” he said. “The second thing is to just fold, and say, we didn’t write this rule, it didn’t happen on our watch and it’s not an issue that we want to prioritize at this time, and so we will withdrawal the new definition and stick with the old definition until we have time to study it.”
Schulman said the third option would be for HUD to compromise and re-revise the required use definition. “If they did that, then they would have to open it up for comment again,” Schulman noted. “That would open up that whole can of worms and start the debate between consumers, mortgage brokers, home builders and other settlement service providers, and I don’t know if a new administration would have the stomach for that,” he commented.
The fourth option Schulman said would be for HUD to draft a policy statement to interpret the new rule broadly, so that it would provide some breathing room for home builders to participate and provide for consumers incentives to their affiliates.
For example, HUD could offer the builder an opportunity to say to the buyer, “I’ll give you $10,000 off the price of my house, if you use one of four mortgage companies, one of which is my affiliate,” Schulman explained. This would give the consumer choices Schulman said, and would make for a more liberal and broader reading of the rule.
In Schulman’s opinion, he thinks HUD will go with either the first option of fighting the lawsuit or the second option of throwing the rule out, using the old definition of “required use,” and revisiting the provision at a later date.
Lax said it was unlikely HUD staff would withdraw the final rule.
“They are not going to go back now, after they won the fight, unless they get a direct order from the new secretary of HUD to scrap the rule,” he said. “If there is to be a delay, the secretary may need to get the General Counsel’s office to draft a notice for the Federal Register, so that the notice will be published this year. HUD staff took 12 years to change the Servicing Disclosure Statement after ordered to do so by Congress. Do you really think that a memo like this is going to spark any action at HUD to delay a rule that HUD staff wants?” Lax questioned.
Obama’s memo covered six areas of instruction outlined as follows:
“…no proposed or final regulation should be sent to the Office of the Federal Register for publication unless and until it has been reviewed and approved by a department or agency head appointed or designated after noon on January 20, 2009…
“Withdrawal from the Office of the Federal Register all proposed or final regulations that have not been published in the Federal Register so that they can be reviewed and approved by a department or agency head…
“Consider extending for 60 days the effective date of regulations that have been published in the Federal Register but not yet taken effect…Where such an extension is made for this purpose, you should immediately reopen the notice-and-comment period for 30 days to allow interested parties to provide comments about issues of law and policy raised by those rules…
“The requested actions set forth…do not apply to any regulations subject to statutory or judicial deadlines.
“Notify the OMB Director promptly of any regulations that you believe should not be subject to the directives…because they affect critical health, safety, environmental, financial, or national security functions of the department or agency…
“Continue in all instances to comply with any applicable Executive Orders concerning regulatory management.
According to K&L Gates Attorney Phil Schulman, the request will not affect the U.S. Department of Housing and Urban Development’s (HUD) final RESPA rule provisions, which took effect Jan. 16, since they came in under the 60-day phase in period. The review could open the door, however, to re-evaluation of the required use provision and the new good fait estimate (GFE) and HUD-1.
Obama’s order advised executive heads to “consider extending for 60 days the effective date of regulations that have been published in the Federal Register, but not yet taken effect…for the purpose of reviewing questions of law and policy raised by those regulations.” He further advised to reopen the comment period for 30 days on delayed regulations “that raise substantial questions of law or policy.”
Attorney Howard Lax of Michigan-based Lipson, Neilson, Cole, Seltzer & Garin said that as far as reopening the new RESPA rule for comment, “…the memo only says that agencies should ‘consider’ reopening the comment period. It does not mandate reopening the comment period. I expect that HUD will notify the OMB director that the rule does not raise any issues of ‘law or policy’ that are critical and/or the change in the disclosure format is critical for financial reasons and, therefore, the changes to the rule should be exempt from the directive.”
GFE and HUD-1
Schulman said that although possible, it was unlikely the administration would ask HUD to withdraw the GFE and HUD-1 portions of the regulation. He noted that the GFE and HUD-1 are already in a holding pattern as they don’t take affect until January 2010.
“They’re not that controversial,” Schulman commented. “The whole idea was to give transparency and clarity, and I think they do provide that. Could the Obama administration go farther? Require more consumer protections? I think it’s unlikely, given their priorities at HUD.”
HUD’s options
HUD has already agreed to a 90-day delay of the required use provision, giving the courts time to hear arguments in the lawsuit filed against HUD by the National Association of Home Builders. The court is fast-tracking that case to make a decision before that 90-day period runs out.
“As for required use, that is the unknown here,” Schulman said. “Right now HUD is scheduled to go back into court at the end of March to contest the motion for permanent injunction.”
Schulman said HUD will have to make a decision between four different options regarding “required use.”
“One is to fight, which would be to vigorously defend the Nov. 17 regulation on required use,” he said. “The second thing is to just fold, and say, we didn’t write this rule, it didn’t happen on our watch and it’s not an issue that we want to prioritize at this time, and so we will withdrawal the new definition and stick with the old definition until we have time to study it.”
Schulman said the third option would be for HUD to compromise and re-revise the required use definition. “If they did that, then they would have to open it up for comment again,” Schulman noted. “That would open up that whole can of worms and start the debate between consumers, mortgage brokers, home builders and other settlement service providers, and I don’t know if a new administration would have the stomach for that,” he commented.
The fourth option Schulman said would be for HUD to draft a policy statement to interpret the new rule broadly, so that it would provide some breathing room for home builders to participate and provide for consumers incentives to their affiliates.
For example, HUD could offer the builder an opportunity to say to the buyer, “I’ll give you $10,000 off the price of my house, if you use one of four mortgage companies, one of which is my affiliate,” Schulman explained. This would give the consumer choices Schulman said, and would make for a more liberal and broader reading of the rule.
In Schulman’s opinion, he thinks HUD will go with either the first option of fighting the lawsuit or the second option of throwing the rule out, using the old definition of “required use,” and revisiting the provision at a later date.
Lax said it was unlikely HUD staff would withdraw the final rule.
“They are not going to go back now, after they won the fight, unless they get a direct order from the new secretary of HUD to scrap the rule,” he said. “If there is to be a delay, the secretary may need to get the General Counsel’s office to draft a notice for the Federal Register, so that the notice will be published this year. HUD staff took 12 years to change the Servicing Disclosure Statement after ordered to do so by Congress. Do you really think that a memo like this is going to spark any action at HUD to delay a rule that HUD staff wants?” Lax questioned.
Obama’s memo covered six areas of instruction outlined as follows:
“…no proposed or final regulation should be sent to the Office of the Federal Register for publication unless and until it has been reviewed and approved by a department or agency head appointed or designated after noon on January 20, 2009…
“Withdrawal from the Office of the Federal Register all proposed or final regulations that have not been published in the Federal Register so that they can be reviewed and approved by a department or agency head…
“Consider extending for 60 days the effective date of regulations that have been published in the Federal Register but not yet taken effect…Where such an extension is made for this purpose, you should immediately reopen the notice-and-comment period for 30 days to allow interested parties to provide comments about issues of law and policy raised by those rules…
“The requested actions set forth…do not apply to any regulations subject to statutory or judicial deadlines.
“Notify the OMB Director promptly of any regulations that you believe should not be subject to the directives…because they affect critical health, safety, environmental, financial, or national security functions of the department or agency…
“Continue in all instances to comply with any applicable Executive Orders concerning regulatory management.
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