The Final RESPA Rule

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HUD's explanation on 2010 Good Faith Estimate and 2010 HUD1

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The Final RESPA Rule

  1. 1. The Final RESPA Rule
  2. 2. Principles of RESPA Reform • Help consumers shop for the best loan • Shopping leads to greater competition & lower prices 2
  3. 3. Principles of RESPA Reform • Key final terms of the loan disclosed to the borrower at closing • Preserve a competitive market for all settlement service providers 3
  4. 4. Effective Dates January 16, 2009 January 1, 2010 • Servicing • new GFE Disclosure Statement • new HUD-1/1A • elimination of 1% • average charge cap on FHA • technical changes origination fees 4
  5. 5. Servicing Disclosure Statement 5
  6. 6. GFE 6
  7. 7. GFE Notice Requirements • provided no later than 3 business days by hand, mail, fax, email • not required if application denied or withdrawn by borrower • may be provided by mortgage broker, but lender is responsible 7
  8. 8. GFE Triggers • borrower’s name • Social Security number • property address • monthly income • house value or best estimate • amount of loan … & any other information 8
  9. 9. GFE Page 1 9
  10. 10. Important Dates 10
  11. 11. Summary of your loan 11
  12. 12. Summary of your loan 12
  13. 13. FHA Monthly Interest The monthly accrual of interest on an FHA loan is not considered a prepayment penalty. 13
  14. 14. Escrow account information 14
  15. 15. Summary of your settlement charges 15
  16. 16. GFE Page 2 16
  17. 17. Block 1, “Our Origination Charge” Must contain ALL charges by ALL loan originators in the transaction 17
  18. 18. Old GFE vs. New GFE for Loan Origination Fees origination fee/point mortgage broker fee processing doc prep commitment application wire MERS registration underwriting delivery/courier admin doc review electronic miscellaneous “Our Origination Charge” 18
  19. 19. Block 2, Your Credit or Charge 19
  20. 20. Example 20
  21. 21. All Other Settlement Services 21
  22. 22. Written List If a loan originator permits a borrower to shop for services (Block 4, 5 & 6), the loan originator must provide a written list of providers that the estimates were based on. 22
  23. 23. Written List • Must be provided with GFE on a separate piece of paper • Must include at least one provider of each shoppable service. 23
  24. 24. Old GFE vs. New GFE for Title Services settlement fee abstract/title search title examination doc prep attorney fee commitment/binder notary wire fee lender’s title insurance endorsements courier/delivery copying electronic miscellaneous “Title services & lender’s title insurance” 24
  25. 25. All Other Settlement Services 25
  26. 26. GFE Page 3 Instructions 26
  27. 27. Which charges can increase 27
  28. 28. Tradeoff table 28
  29. 29. Shopping Chart 29
  30. 30. Changed Circumstances • Acts of God, war, disaster or other emergency • changed or inaccurate information provided by borrower after issuance of GFE (e.g. credit quality, loan amount, property value, or other information) 30
  31. 31. Changed Circumstances If circumstances changed affecting settlement costs or loan: • provide revised GFE within 3 days • revised GFE may reflect only the increased charges 31
  32. 32. Borrower Requested Changes Loan originator may provide new GFE within 3 days 32
  33. 33. Interest Rate: not locked If borrower does not lock interest rate within time period & the interest rate changes, a new GFE must be issued 33
  34. 34. Expired GFE If borrower does not express intent to proceed with the loan after 10 business days, or longer if specified by originator, the GFE is considered expired. 34
  35. 35. New Home Purchases If settlement is anticipated to be more than 60 days after GFE, originator may disclose on separate piece of paper that the GFE may be revised any time up to 60 days before settlement is anticipated. 35
  36. 36. HUD-1 Settlement Statement 37
  37. 37. Lines 204 – 209: principal amount of additional loans May also show 2nd loan proceeds 38
  38. 38. Seller (or other) Paid Items • all GFE charges; put in borrower’s column on the HUD-1 • credit to borrower from seller in Lines 206 – 209 &Lines 506 – 509 • credit from party other than seller, must identify party giving credit on HUD-1 39
  39. 39. Seller credit example 40
  40. 40. HUD-1 Page 2 41
  41. 41. 700s Example 42
  42. 42. Line 801 & 802: listed outside column Line 803: listed inside column 43
  43. 43. IRS: Origination Point Disclosure May be disclosed in Line 801… or… 44
  44. 44. Place asterisk in Line 801 & reference on bottom of page 2 on the HUD-1. 45
  45. 45. Lines 804 thru 807: charges in borrower’s column 46
  46. 46. Lines 901 – 904: charges inside column 47
  47. 47. Line 1001: charges listed inside column Lines 1002 – 1007: charges listed outside column 48
  48. 48. 1100s - Title service: definition “Title services” Means any service involved in the provision of title insurance 49
  49. 49. 1100s - Title service Includes, but is not limited to… - title examination & evaluation - preparation & issuance of commitment - preparation & issuance of policies - all administrative services & processing services required to perform these functions 50
  50. 50. 1100s Example 51
  51. 51. Line 1102: Itemized 3rd Party Charge 3rd party borrower charge listed outside column 52
  52. 52. Line 1102: Seller Charge Separate seller charge in seller’s column. 53
  53. 53. Summary: Outside Column Line 1102 – settlement/closing fee Line 1104 – lender’s title insurance premium & related endorsements Line 1105 – lender’s title policy limit Line 1106 – owner’s title policy limit 54
  54. 54. Summary: Outside Column Line 1107 - $ of title insurance premium + endorsements retained by agent Line 1108 - $ of title insurance premium + endorsements retained by underwriter Line 1109 et seq - title charges paid to 3rd parties 55
  55. 55. 1200’s: Inside the column charges 56
  56. 56. 1200s: Outside the column charges 57
  57. 57. Fee category: 1300s 58
  58. 58. HUD-1, page 3 59
  59. 59. Comparison Chart 60
  60. 60. Charges That Cannot Increase 61
  61. 61. 10% Tolerance 62
  62. 62. 10% Tolerance 63
  63. 63. 10% Tolerance 64
  64. 64. Charges That Can Change 65
  65. 65. Right-to-cure: tolerance Charges exceeding tolerance not a violation of RESPA Section 5 IF cured within 30 days after settlement 66
  66. 66. Loan Terms 67
  67. 67. Loan Terms 68
  68. 68. Loan Terms 69
  69. 69. Right-to-cure: errors Inadvertent or technical errors not a violation of RESPA Section 4 IF revised HUD-1 is provided within 30 days after settlement 70
  70. 70. Average Charge 71
  71. 71. Average Charge • may not average on charges based on loan amount or property value (e.g. transfer taxes, interest charges, escrow reserves & all insurances including title insurance) 72
  72. 72. From the FAQs… 73
  73. 73. FAQs Q: If a loan originator contracts loan document preparation to a third party, is this a separate charge on the GFE and the HUD-1? 74
  74. 74. FAQs A: No, loan loan document preparation is a processing and administrative service in the origination of a loan and is included in Block 1 of the GFE and should not be separately itemized. 75
  75. 75. FAQs Q: If there is a “changed circumstances”, when does the loan originator issue a new GFE? 76
  76. 76. FAQs A: When there is a “changed circumstances” and the loan originator intends to issue a revised GFE, the loan originator must do so within three business days of receiving information sufficient to establish changed circumstances. 77
  77. 77. FAQs Q: If a borrower pays some of the origination charge prior to closing, how should it be disclosed on the HUD-1? 78
  78. 78. FAQs A: The charge for origination must be shown on Line 801 of the HUD-1 to the left of the borrower’s column in the 200 series. 79
  79. 79. FAQs Q: If a charge was calculated using average charge, may the charge be waived or discounted? 80
  80. 80. FAQs A: Yes. Discounting or waiving a charge calculated using average charge is permitted. 81
  81. 81. FAQs Q: If state law requires further itemization of title service, title insurance related fees, or title policy endorsements, how should these fees be listed on the HUD-1? 82
  82. 82. FAQs A: Those fees may be itemized on blank lines in the 1100 series – charge outside the borrower’s column. Endorsements may be listed in Lines 1103 & 1104 – charge outside the borrower’s column. 83
  83. 83. FAQs Q: If borrower purchases a Lender's & Owner's title insurance policy & receives a simultaneous issue discount, is the discounted amount for the Lender's policy listed in Line 1104 on the HUD-1? 84
  84. 84. FAQs A: Yes, the settlement agent must record the actual charge of the lender’s title insurance premium & related endorsements in Line 1104. 85
  85. 85. FAQs Q: If a borrower selects an attorney to represent the borrower‘s personal interests at settlement, where is this attorney‘s fee disclosed on the HUD-1? 86
  86. 86. FAQs A: May be separately listed on a blank line in the 1100 series in borrower‘s column with the name of the attorney & the type of service provided. 87
  87. 87. FAQs Q: Should the loan originator quote the charge for a basic owner‘s title insurance policy or an enhanced owner‘s title insurance policy on the GFE? 88
  88. 88. FAQs A: Loan originator should quote rate for the basic owner‘s title insurance policy. If borrower chooses an enhanced owner‘s policy before GFE is issued, loan originator should quote the rate for an enhanced policy. 89
  89. 89. Department of Housing and Urban Development Office of RESPA & Interstate Land Sales 451 7th Street SW, Room 9154 Washington DC 20410 (202) 708-0502 hsg-respa@hud.gov www.hud.gov/respa 90

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