| The Value of the Sunshine Cure: The Efficacy of the Real Estate Settlement Procedures Act Disclosure Strategy
Mark D. Shroder
U.S. Department of Housing and Urban Development
This article reflects the views of the author and does not necessarily reflect the views of the U.S. Department of Housing and Urban Development.
This article examines the efficacy of the disclosure strategy of the Real Estate Settlement Procedures Act (RESPA). Four questions are critical in evaluating the efficiency of federally mandated disclosure by itself as a regulatory strategy: whether lending and title fees are large enough to be worth regulating; whether the Good Faith Estimate mandated by RESPA is an unbiased and consistent estimator of lending and title fees; whether state law has a negligible effect on fees (and therefore only national regulation is pertinent to the problem RESPA addresses); and whether RESPA achieves fairness, in the sense that disclosure so strengthens the negotiating position of buyers and sellers relative to service providers that the principals’ personal characteristics do not influence the fees they pay. This article presents preliminary tests on these issues from a small and somewhat unrepresentative sample of FHA-insured loans.
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