It's no secret in Washington that RESPA reform -- that's the acronym for the real estate settlement rules that govern all home sales and financings -- is a hot potato that nobody seems able to handle.

The Bush administration has tried twice to simplify the complex rules, most recently earlier this year. Industry groups from the National Association of Realtors, the Mortgage Bankers Association and the title and settlement associations have jumped all over the proposals, calling them costly and ineffective.

But last week industry critics rolled out a weapon nobody expected: With the Realtors leading the charge, industry opponents convinced a bipartisan majority of the House of Representatives -- 243 congressmen, Republicans and Democrats -- to sign a letter demanding that the HUD secretary yank the proposed rules immediately and work with the Federal Reserve Board to come up with something better.

The congressional letter to Steven Preston even pointedly noted that the federal agency he headed until recently -- the Small Business Administration -- had weighed in with its own criticism of HUD's proposals, arguing that they would be an unfair burden on small businesses across the country.

Among the issues that industry critics have raised:

  • HUD's proposed regulation would penalize lenders and brokers whose up-front good faith estimates of settlement fees differ by 10 percent or more from the final figures at closing.

  • The new mortgage disclosure forms would go from the current one page to four pages -- which hardly amounts to simplification and would likely be ignored by most consumers.

  • A new, nationally-mandatory closing script -- to be read to all home buyers at settlement -- would add an average of 45 minutes to home sales closings, and potentially gum up transactions needlessly.

A spokesman told Realty Times the agency had no immediate comment on the unusual congressional letter, but that Preston is committed to try to strike a balance between industry and Capitol Hill critics on the one hand, and the need to better inform consumers about real estate transaction costs on the other.

HUD's main objective in RESPA reform is to empower consumers to shop more effectively for the best mortgage deals. Industry groups say they have no problem with that, but they think HUD's proposals are counterproductive.

The outlook? The clock is ticking on the Bush administration. Even if Preston delivers a more balanced set of real estate disclosure rules -- and he just might succeed -- the next administration may just decide to chuck them and start all over again.