Journal of Real Estate Finance and Economics, 23:3, 297±303, 2001
# 2001 Kluwer Academic Publishers. Manufactured in The Netherlands.
Comment: Policy First, Research AfterwardÐ
The History of RESPA
JOHN C. WEICHER*
Hudson Institute, 1015 18th Street, N.W., Washington, DC 20015
More than a quarter of a century after the Real Estate Settlement Procedures Act (RESPA)
was enacted, the statute is regarded as highly unsatisfactory. This opinion is shared by
nearly every entity actively concerned with settlement servicesÐbusinesses and consumer
advocacy groups alike. Nonetheless, RESPA's dreary history must be remembered to
understand where public policy is today. Accordingly, I ®rst review the legislative history,
and then I comment on Peter F. Colwell and Charles M. Kahn's excellent paper in the light
of that history. RESPA covers many issues, but I focus primarily on referrals and
disclosure, as do the authors.
A concise but confusing history
RESPA grew out of a late 1960s concern with the rapidly rising cost of settlement services,
particularly the widespread practice of paying referral fees among providers of different
services, which were criticized as ``kickbacks.'' Legislation in 1970 gave HUD the right to
regulate settlement costs. A joint HUD-VA task force conducted a year-long study and
issued a regulatory proposal in 1972. That proposal was opposed by lawyers, bankers, and
title insurers, who successfully lobbied HUD to withdraw the proposal and persuaded
Congress to pass legislation instead. Title insurers were especially prominent in this
lobbying activity; the task force had recommended a national land registration system that
would have eliminated the need for title insurance. (RESPA's fourth and last stated public
purpose is ``signi®cant reform and modernization of local record keeping of land title
information'': that was about as far as the task force recommendation got.)
Congress responded with RESPA, which required full disclosure of settlement services
costs 12 days before settlement and appeared to prohibit a variety of traditional business
arrangements among ®rms that had little, if any, effect on cost. That ®rst law lasted a year.
Homebuyers found it bewildering and infuriatingÐit slowed down the process of closing
and moving into their homesÐand they complained to Congress directly. So did the
settlement-services industry, but I believe the homebuyers' complaints mattered more.
*This paper was written while the author was Director of Urban Policy Studies at the Hudson Institute. He is now
Assistant Secretary for Housing/FHACommissioner at the U.S. Department of Housing and Urban Development.
The opinions expressed in this paper are not necessarily those of either the Hudson Institute or the U.S.
Department of Housing and Urban Development.