JOHN D. GRAHAM, PH.D.
OFFICE OF INFORMATION AND REGULATORY AFFAIRS
COMMITTEE ON SMALL BUSINESS
UNITED STATES HOUSE OF REPRESENTATIVES
January 6, 2004
Mr. Chairman, and Members of the Committee, thank you for inviting me to this hearing. I am John D. Graham, Ph.D., Administrator, Office of Information and Regulatory Affairs, (OIRA) Office of Management and Budget. I am pleased to have this opportunity to explain OMB’s role in reviewing the Real Estate Settlement Procedure Act (RESPA) Regulations. As you know Mr. Chairman, the RESPA rule is currently under review at OMB. Accordingly, my testimony cannot address the substance of the rule or internal administration deliberations. What I can testify to, however, and am happy to reassure the Committee of, is OMB’s commitment to thoroughly review the rule. This will include a comprehensive examination of HUD’s regulatory impact analysis, regulatory flexibility analysis, and other analysis required by statute and executive order. Furthermore, I can assure you that OIRA remains committed to the unprecedented degree of openness in the regulatory review process that has been fostered under this administration.
Our general review procedures for rulemaking are as follows. Under Executive Order 12866, which was adopted during the previous Administration, OMB reviews all significant regulatory actions to ensure consistency with the principle of good regulatory analysis and policy. At both the proposed and final stages of a major rulemaking, OMB is provided with up to 90 days to review an agency's rulemaking package, including the draft rule, the regulatory impact analysis, the Regulatory Flexibility Act analysis if required, and any other supporting materials. Since HUD’s rule will have a significant effect on a substantial number of small entities, a Regulatory Flexibility Act analysis is required for the RESPA rulemaking. In EO 12866, the President directs agencies, to the extent permitted by law, to follow certain principles in rulemaking, such as consideration of alternatives and analysis of impacts, both benefits and costs. There are ultimately three possible outcomes of OMB review: (1) conclusion of review and publication in the Federal Register; (2) withdrawal by the agency for further consideration; or (3) return by OMB to the agency for reconsideration.
While a rule is under review, EO 12866 requires us to have an open-door policy. By consulting OMB's web site, the public can learn on a daily basis which rules are under formal review at OMB, which have been cleared or returned, and even which groups have recently presented their views to our office: their names, organizations, the date of the meeting and topic of the discussion. We will meet with any party interested in discussing regulatory issues, whether they are from State or local government, small business, big business, consumer groups or the environmental, health, safety or other communities. As you know, we cannot discuss the substance of a rule under review with any outside groups prior to publication of the rule; however, we do take into account any comments raised by these outside groups during the rule review process. Any material received from outside parties on rules under review is placed in the public docket and noted on OMB’s website. In addition, a representative of the agency that submitted the rule is always invited to attend these meetings, to ensure that OIRA and the agency receive the same information. We have already hosted a number of meetings with concerned consumer and industry groups regarding the RESPA rule, and we anticipate hosting additional meetings as they are requested during the review process.
Upon publication of a rule, OMB’s docket file is made publicly available. That public docket file contains a copy of the rule as submitted to OMB, a copy of the rule post OMB review, and any formal communications between Senior Executive Service (SES) employees or policy officials between OMB and the rulemaking agency. It also contains any information submitted by outside groups during our review.
In addition to communications with outside groups, OMB coordinates review by other agencies in the Executive Branch with an interest in the rulemaking.
OMB is very aware that small businesses often face a disproportionate share of the Federal regulatory burden compared to their larger counterparts. Pursuant to Executive Order 13272 which deals with small entity and agency rulemaking, OMB and the Office of Advocacy signed a Memorandum of Understanding (MOU) to enhance our working relationship, improve information sharing and provide training for agencies on compliance with the Regulatory Flexibility Act. This MOU establishes an information sharing process between Advocacy and OIRA when a draft rulemaking is likely to impact small entities. Consistent with this MOU and EO 13272, OIRA and Advocacy are working together in the review of the RESPA rule. The Regulatory Flexibility Act (RFA), in this case, requires HUD to examine the impact of their rulemaking on small firms such as settlement service providers, mortgage brokers, and small lenders.
It should be noted, however, that the RFA is one of many analyses that OMB evaluates. Statutes such as the Unfunded Mandates Reform Act and the Paperwork Reduction Act require agencies to perform similar analyses of specific costs, benefits, and burdens associated with rulemakings. EO 12866 requires agencies to evaluate all costs and benefits to society from a regulation.
While I am not able to discuss the substantive issues raised by the draft RESPA final rule, I would like to mention a number of matters that OIRA addressed at the proposed rule stage. When OMB concluded review of HUD’s proposed RESPA rule in June 2002, we sent HUD officials a “post-review” letter, highlighting issues that should be taken into consideration when drafting the final rule. As we said in the letter, OMB considers this rulemaking endeavor to be very promising, since it strengthens consumer protection and promotes consumer choice, thereby creating positive market changes. In drafting the final rule, we asked HUD to pay special attention to forms, economic analysis, and regulatory flexibility analysis in order to make them even stronger at the final stage than they were at the proposed stage. An important task in our on-going review is to assess whether HUD has strengthened these components of the rule.
Chairman Manzullo, you have requested that OIRA conduct a rigorous review of this matter. I can assure you that the RESPA rule is receiving a thorough review. We appreciate your interest in the rule, and will work to address the concerns that you have raised throughout the process. Thank you very much for the opportunity to appear today. I am happy to take any questions you may have.