The limits of RESPA: An empirical analysis of the effects of mortgage cost disclosures

Elizabeth Renuart and Jen Douglas

Housing Policy Debate, 2011, vol. 21, issue 4, 481-528

Abstract: Congress passed the Real Estate Settlement Procedures Act (RESPA) in 1974 based upon documented instances of kickbacks between settlement service providers, unearned fees, and expensive and unnecessary closing costs paid by buyers and sellers of residential real estate. It opted for a disclosure strategy accompanied by few substantive prohibitions. Over the last 37 years, only a handful of studies attempted to measure the success of the mortgage loan disclosures. This article uses a uniquely rich database to examine this question. We find evidence that closing costs increased since 1972 and fee types proliferated. The early cost estimate underestimated the final closing costs and projected cash to borrowers in a majority of cases, lending credence to complaints of baiting and switching. These observations call into question the efficacy of the RESPA disclosure scheme. Further, they point to the need for detailed data collection, routine monitoring of whether RESPA is meeting its legislative intent, and rigorous debate about whether RESPA's goals can be achieved more effectively by another strategy. This article is particularly timely because Congress instructed the new Bureau of Consumer Financial Protection to combine RESPA and related Truth in Lending Act disclosures into a single, integrated form by the summer of 2012.

Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/10511482.2011.615849 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:houspd:v:21:y:2011:i:4:p:481-528

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RHPD20

DOI: 10.1080/10511482.2011.615849

Access Statistics for this article

Housing Policy Debate is currently edited by Tom Sanchez, Susanne Viscarra and Derek Hyra

More articles in Housing Policy Debate from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().