The association supports efforts to improve the consumer disclosure law that ensures that the buyer and seller have knowledge of all settlement costs in a real estate transaction, and has long supported transparency and consumer disclosures, McDonald said. However, the association believes that there are serious flaws with the U.S. Department of Housing and Urban Development's current proposal and believes it may create more problems than it solves.

"Given the ever-growing opposition to the proposed rule from the industry, consumer groups and Congress, we feel it is more important now than ever that this rule not be finalized in its current form. Even earlier supporters of the proposal have expressed what we in the real estate business call 'buyers remorse' due to the uncertainty associated with the impact of this initiative," said McDonald. "It is our hope that this rule will be sent back to HUD for more analysis with instructions to craft a new proposed rule that will provide for additional public comment. Otherwise, HUD's RESPA proposal will drastically change the mortgage finance system to the detriment of consumers and small business."

Concerned that HUD would advance its proposal, the association submitted an alternative proposal that would replace the single-package approach with a fully disclosed two-package system. Realtors believe that a two-package approach to the Real Estate Settlement Procedures Act is more beneficial to consumers because it will allow them to comparison shop for settlement packages among lenders and nonlenders alike, McDonald explained. A single-package proposal would have the opposite effect, reducing competition and limiting consumer choices, as the largest national lenders control the selection of settlement providers.

McDonald said Realtors remain convinced that the changes contemplated by HUD to the real estate disclosure process require further study. He also said the alternative two-package proposal submitted by the National Association of Realtors also requires additional scrutiny and debate.

"As a Realtor, I work with borrowers, lenders and settlement service providers every day to help people achieve the dream of homeownership. Based on my professional experience, I know that any system that permits a single package to be offered by a lender will disadvantage the diverse small businesses that make up a large portion of the real estate industry. Less competition means a contraction of the real estate industry and higher costs for consumers," said McDonald. "Therefore, any RESPA reform proposal that grants the lender an unfair advantage or includes a variation of the NAR-supported two-package proposal, such as permitting both single-package and two-package disclosures, is simply unacceptable."

Information provided in this column is presented by the Realtor members of the Silicon Valley Association of Realtors at www.silvar.org. Send questions on any topic to jnewton@jnpr.com.