Written by Howard A. Lax of LIPSON, NEILSON, COLE, SELTZER & GARIN, P.C.

The following article is reprinted with permission from the January/February 2007 edition of The Mortgage News.

HUD increased civil money penalties for a number of its regulations, including the penalty for a loan servicer's failure to provide an escrow analysis under Section 17 of Regulation X. Why couldn't HUD fix Section 21 of Regulation X while it was tinkering with its regulation? We keep reminding HUD that Section 6 of RESPA was amended in 1996:

Sec. 2103. REDUCTIONS IN REAL ESTATE SETTLEMENT PROCEDURES ACT OF 1974 REGULATORY BURDENS.

(a) Unnecessary Disclosure.--Section 6(a) of the Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2605(a)) is amended to read as follows:

``(a) Disclosure to Applicant Relating to Assignment, Sale, or Transfer of Loan Servicing.--Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.''.

The Servicing Disclosure Statement disclosure is no longer required by RESPA, and HUD should amend Section 21 of Regulation X to conform to the law. Even Grant Mitchell, who wrote the 1992 version of Regulation X, concurs that changing Section 21 of Regulation X is long overdue. In an email message we received on January 10, 2007, Grant Mitchell stated:

...I left the regulatory revision to Section 6 Mortgage servicing in the bin before I left HUD in April 1999. Maybe someone just felt a midnight amendment on a September 30th in an Omnibus Reconciliation Act for the entire federal government didn't deserve recognition and they are not going to do it. It's called administrative abnegation. There are a couple of Japanese soldiers in a cave on Okinawa, also, who don't know the war is over.

Grant

Grant E. Mitchell, Esq.
Lotstein Buckman, LLP
5185 MacArthur Boulevard, NW
Washington, D.C. 20016
202-237-6000 x118 or 202-351-6118 (Direct) 202-237-8900 FAX mitchell@lotsteinbuckman.com
website: www.lotsteinbuckman.com

The revised law is on HUD's web site - it is not as if nobody at HUD realizes that RESPA has changed. As far as we can tell, changing Section 21 of Regulation X is not even on someone's "to do" list. In case HUD needs to look up the term "abnegation," it means "self denial" (according to dictionary.com). Congress amended RESPA more than a decade ago. HUD can no longer rationally claim self denial. We think that, in this case, HUD's inaction would be better described as "self delusion."