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Inmotion Respa0109 2010
- 1. New RESPA Regulations:What Every Agent Should Know InMotion Real Estate Institute Prepared by Juanita McDowell/Lead Trainer , IM RE I
- 2. Purpose RESPA - Real Estate Settlement Procedures Act Help borrowers shop for a loan more with ease Remove factors in lending that increase costs to consumers, such as kickbacks and unearned referral fees
- 3. Background RESPA establishedin 1974 Controversial 2005 HUD conducted roundtable discussions Bad timing for new rule
- 4. “ Millions offamilies go to the settlement table each year without clearly understanding what they are paying for. In many respects, it’s clear that the current way people buy and refinance their homes isn’t serving us very well at all and has contributed to the current housing crisis.” Former HUD Secretary Steve Preston
- 5.
- 6. HUD’s Settlement CostBooklet
- 7. HUD’s Settlement CostBooklet Highlights
- 8.
- 9. HUD’s Settlement CostBooklet Highlights It is your responsibility to search for an agent who will represent your interests … If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.
- 10. HUD’s Settlement CostBooklet Highlights … agent may also recommend that you deal with a particular lender…attorney. You are not required to follow the recommendation, and you should compare the costs and services offered by other providers before making a decision.
- 11. Definitions Loan OriginatorLender Mortgage Broker Origination Charges
- 12. New Good Faith Estimate
- 13. New Good Faith Estimate Effective 1/1/2010 Borrowers to shop lenders GFE HUD
- 14. New Good Faith Estimate Provided within 3 days of APPLICATION Quotes are fixed for 10 days “Changed Circumstance” (only exception) Lender may not charge borrower for GFE May charge for a credit report
- 15. Application Definition Borrower’s Name & Monthly Income Social Security Number to pull credit Property Address Estimate of value of the property Loan amount Any other necessary information
- 16. Changed Circumstances Acts of God, war, disaster New info particular to the borrower: Property Address change Parties are added or removed from title Property use may change (primary to NOO)
- 17. Changed Circumstances Change in Mortgage Insurance Credit policy change After GFE is issued, POA is identified Additional services required (pest inspection, survey, upgraded appraisal) Borrower credit score changes
- 18. Changed Circumstances If Changed Circumstance, LO must issue a new GFE within 3 business days LO must retain documentation on changed circumstance for 3 years
- 19. New Good Faith Estimate – P 1 1 ABC Mortgage/Joe Brown Kim Cooper 1/31/2010
- 20. New Good Faith Estimate - P 1 1
- 21. New Good Faith Estimate - P 1 1
- 22. New Good Faith Estimate - P 1 1 Attorneys will rely on this. Cash needed at closing?
- 23. PAGE 2 - Good Faith Estimate Breaks down the charges for 11 different settlement cost categories Provides 3 levels of tolerances Zero 10% No Tolerance
- 24. 2 Majority ofall fees here canNOT increase
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- 26. 2 #7 10% Tolerance #8 Cannot Increase # 9-11 Can Change
- 27. 2 Same amtshown on P1 of GFE
- 28. Tolerances Most importantaspect (“The Meat”) HUD uses to hold lenders accountable Purpose of the revision Simplicity Accuracy Encourage shopping
- 29. 3 Main Partsto GFE P 3 Understanding which charges can change at settlement Using the Tradeoff Table Using the Shopping Cart
- 30. New Good Faith Estimate – P 3 3
- 31. Categories of ChargesCharges which cannot increase at settlement Charges which can increase up to 10% Charges which can change at settlement 3
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- 34. Miscellaneous Tidbits Writtenlist of providers on a separate sheet of paper are required by the lender All charges must be disclosed on the GFE regardless of who is paying No P.O.C. items allowed on GFE
- 35. Miscellaneous Complaints Nosection where the consumer can view their “Cash Required at Closing” – huge oversight No where on the GFE does it show Principal & Interest, MI, HI, Taxes (PITI) represented as one monthly payment
- 36. Buried on page68227 - a decision to dump limits on loan origination fees. Protect the Consumer?
- 37. WHY? Because HUDsays that its new Good Faith Estimate should protect borrowers.
- 38. New HUD Settlement Statement Agents rewarded with synchronized HUD-1 that matches up with GFE Title companies excited to see Closing Script withdrawn New HUD must be used if new GFE Attorneys must follow lenders instructions exactly
- 39. New HUD1 – P 1 Changes on page 1 New box for Rural Housing Service 1
- 40. New HUD1 – P 2 2 (Corresponding GFE Block #)
- 41. New HUD1 – P 2 11 (Commission percentage has been removed.) Line 704 for Buyer’s Earnest Money. Shown as P.O.C.
- 42. New HUD1 – P 2 2 (Lines 804-807 for fees such as appraisal fee, Credit report, etc.) Line 801 contains charges for lender fees
- 43. New HUD1 – P 2 1100 – Major Changes All attorney fees are bundled 1101 shows the total charge of all title services plus lender’s title insurance 1102 shows the amount of the settlement or closing fee 2
- 44. New HUD1 – P 2 1300-1400 1301 shows services required by the LO but borrower can shop for 1400 shows total settlement charges 2
- 45. New HUD1 – P 3 Page 3 is new addition to the HUD-1 Summary of Borrower’s loan terms Comparison of the GFE—HUD-1 Top of page shows 3 Tolerance Buckets See if Lender exceeded tolerances 3
- 46.
- 47. New HUD1 – P 3 Loan Terms Same information provide on P 1 GFE under “Summary of your loan” Lender/LO must provide attorney with information necessary to complete this section 3
- 48. Remember Stay up-to-datewith new GFE/HUD-1 form and RESPA rule changes Print HUDs FAQs from www.hud.gov (Google Respa Reform) Future Outlook – Only constant is change. Write HUD in D.C. if you’d like to offer opinion/suggestions.
- 49. Fun Quiz Numberyour page 1-20 RESPA, HERA, HVCC
- 50. Before issuing aGFE, a lender can charge the consumer for the cost of the credit report. TRUE FALSE 1
- 51. A loan orginatormust issue a GFE no later than __ business days after the loan originator receives an application or information sufficient to complete an application. 3 5 10 2
- 52. POC Items canno longer reflected on the GFE True False 3
- 53. All charges typicallypaid by the borrower must be disclosed on the GFE regardless of whether the charges will be paid for by the borrower, the seller, or other party. True False 4
- 54. The ____ isresponsible for curing tolerance violations. Seller Lender Borrower 5
- 55. If a toleranceviolation is found, the settlement agent must stop the closing immediately to resolve. The lender must rewire funds. True False 6
- 56. To cure aviolation, the lender must reimburse the borrower: 15 days after closing 30 days after closing 7
- 57. A loan originatorcan delay issuing a GFE if there is no property address. TRUE FALSE 8
- 58. Once a loanoriginator discloses the date “All Other Settlement Charges” is good through, this date must be open for at least ___ days from the date the GFE was issued. 3 10 9
- 59. Would a homewarranty go on the GFE if it is paid by the seller? YES NO 10
- 60. HVCC HVCC (HomeValuation Code of Conduct): Under this code which Fannie Mae adopted 5/09, does it prohibit communication between appraiser and agent? YES No www.efanniemae.com 11
- 61. Mortgage Updates HVCC(Home Valuation Code of Conduct): What is the timeframe for providing a copy of the appraisal? They are not “required” to provide at all 3 days prior to closing 10 days after application www.efanniemae.com 12
- 62. HVCC HVCC (HomeValuation Code of Conduct): Can the real estate agent provide factual data and provide their pricing strategy to the appraiser? YES NO www.efanniemae.com 13
- 63. HERA HERA (Housingand Economic Recovery Act) The loan cannot close (i.e. document signing) until ___ business days after the “initial” TIL disclosure has been mailed. 3 7 14
- 64. HERA HERA (Housingand Economic Recovery Act) If the APR “increases” by more than .25% on ARMs, the loan cannot close until ___business days after re-disclosure TIL is received (when applicable). 3 7 10 15
- 65. HERA HERA (Housingand Economic Recovery Act) If the APR increases by more than .125%, the loan cannot close until ___business days after re-disclosure TIL is received (when applicable). 3 7 16
- 66. HERA HERA (Housingand Economic Recovery Act) This act was designed to protect the best interest of: The lender The consumer 17
- 67. HERA HERA (Housingand Economic Recovery Act) was signed by: President Bush President Obama www.efanniemae.com 18
- 68. Resources www.realtor.org www.hud.gov (RESPA) Efannie.com HUD Approved Counseling Agencies
- 69. You’re now upto date…continue to keep your eyes and ears open.
- 70. InMotion RealEstate Institute For more training opportunities, please visit: www.inmotionrei.com
Editor's Notes
- #2 It should be noted that HUD is continuously updating this. I encourage you to stay alert. Be aware—as one atty pointed out to us, the rules and the answers to the questions don’t always match…some of the changes don’t necessarily make sense. There are several inconsistencies that I will point out. And for that reason I encouarge you to write HUD (as I have) at the Washington DC address. I often feel that people on the street like you and me – our ideas and opinions are not represented. So let’s jump in…
- #3 Help borrowers shop for a loan more with ease by simplifying and improving the disclosure requirements for mortgage settlement services Remove factors in lending that increase costs to consumers, such as kickbacks and unearned referral fees
- #6 Disclaimer—best we have available to us now. If there is a change, HUD is your only source, they are the regulating body for RESPA
- #7 Very well done. Puts the power in the consumer’s hands. This is the RESPA’s committee’s way of saying, “If nobody tells you, we have you covered. Just read it. It contains everything you need to know.” I read it cover to cover and I have to tell you,…it’s not missing much.
- #8 # 1 determine what you can afford…not your LO, not your agent, in fact you haven’t found an agent yet. Some subtle messaging done here. You can actually get a chuckle out of it if you read it closely.
- #9 # 1 determine what you can afford…not your LO, not your agent, in fact you haven’t found an agent yet. Some subtle messaging done here. You can actually get a chuckle out of it if you read it closely.
- #10 # 1 determine what you can afford…not your LO, not your agent, in fact you haven’t found an agent yet. Some subtle messaging done here. You can actually get a chuckle out of it if you read it closely.
- #11 # 1 determine what you can afford…not your LO, not your agent, in fact you haven’t found an agent yet. Some subtle messaging done here. You can actually get a chuckle out of it if you read it closely.
- #12 Information particular to the borrower – this may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property or any other information that was used in providing the GFE New information particular to the borower or transaction that was not relied on in providing the GFE Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance or enviromental problems. HUD’s FAQs contain many examples of what may be deemed a “changed circumstance” If there is a changed circumstance and the LO intends to issue a new GFE, they must do so within 3 biz days of receiving the information sufficient to establish the CC Must retain docs for 3 years
- #13 Centerpiece of the reform. Goal was greater clarity and transparency. Only HUD could simplify a GFE from 1 page to 3.
- #14 Centerpiece of the reform. Goal was greater clarity and transparency. Only HUD could simplify a GFE from 1 page to 3.
- #15 Centerpiece of the reform. Goal was greater clarity and transparency. Only HUD could simplify a GFE from 1 page to 3.
- #16 Centerpiece of the reform. Goal was greater clarity and transparency. Only HUD could simplify a GFE from 1 page to 3.
- #17 Information particular to the borrower – this may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property or any other information that was used in providing the GFE New information particular to the borrower or transaction that was not relied on in providing the GFE Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance or environmental problems. HUD’s FAQs contain many examples of what may be deemed a “changed circumstance” If there is a changed circumstance and the LO intends to issue a new GFE, they must do so within 3 biz days of receiving the information sufficient to establish the CC Must retain docs for 3 years
- #18 Information particular to the borrower – this may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property or any other information that was used in providing the GFE New information particular to the borrower or transaction that was not relied on in providing the GFE Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance or environmental problems. HUD’s FAQs contain many examples of what may be deemed a “changed circumstance” If there is a changed circumstance and the LO intends to issue a new GFE, they must do so within 3 biz days of receiving the information sufficient to establish the CC Must retain docs for 3 years
- #19 Information particular to the borrower – this may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property or any other information that was used in providing the GFE New information particular to the borower or transaction that was not relied on in providing the GFE Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance or enviromental problems. HUD’s FAQs contain many examples of what may be deemed a “changed circumstance” If there is a changed circumstance and the LO intends to issue a new GFE, they must do so within 3 biz days of receiving the information sufficient to establish the CC Must retain docs for 3 years
- #21 Important dates: This section sets out the deadliines after which the loan terms set forth in the GFE may not be available to the borrower. Box 1: There are no restrictions on the amount of time the interest rate may be availabe; it is up to the LO; if the interst rate is not available for any period of time, this line should read “Not Available, N/A”. Box 2 MOST Important. The estimate for “all other settlement charges is available for at least 10 business days from when the GFE is provided to the borrower (i.e. if mailed, it would be from the date the GFE is placed in the mail to the borrower); if revisaed GFE is issued, the 10 business days runs from the time the revised GFE is provided to the borrower. If a change in circumstance – reissue—then add 10 days. It canNOT change. Box 3: this box must be completed with the number of calendar days in which the borrower must go to settlement after the rate is locked; A range of days is not permitted; if the Lender does not offer a rate lock, then NA should be stated.
- #22 Your initial Loan amount is the amount of the principal loan balance on the date of closing Loan term is the # of years (15, 20, 30) Initial interest rate – day of closing Even if you make payments on time, can your loan rise? Negative amortization. Repayment of any assistance from federal or state housing programs should be excluded from consideration. Prepayment. FHA loans do not have pre-payment penalty but some conv loans are out there and still have this.
- #23 The first box is for the monthly pamount of the principal, interest and mortgage insurance (if applicable); this should be the same number entered above under “Your initial monthly amount owed” This amount does NOT include what the monthly amount will be with escrows; Escrow account amounts will be entered on Page 2 of the GFE, Block 9. BTW, we’re still on PAGE 1 of the GFE. Do we require you to have an escrow account for you loan? Y or N? Summary of your settlement charges. This section cannot be filled in until Page 2 on the GFE is completed
- #25 One bundled fee. All orig charges for lenders and mortgage brokers, including fees for admin and processing, underwriting, doc prep, application fee, wire, lender inspection, loan handling, other LO miscellaneous -- are included in the charge in Block 1 of GFE, “our orig charge” and should not be itemized separately. Block 2. For transactions without a mortgage broker, check the first box if the credit or charge for the interest rate is included in “our origination charge.” You Receive a credit. For transactions with a mortgage broker, check the second box if there is a credit to the borrower for the interest rate chosen You Pay a charge. W/ a mortgage broker. If there is a charge for the interest rate chosen (discount points). Charges cannot increase, Credits can increase. Block A. In this section, add block 1 and block 2 and enter total in block A. This number could be a negative # if the credit in Block 2 is larger than the charge in Block 1. This # could also be 0. YOUR CHARGES FOR ALL OTHER SETTLEMENT SERVICES. This includes charges for Block 3 through Block 11. We’ll dig into those blocks in just a moment. First let’s get a feel for these blocks using a real time scenario.
- #26 Block 3. Required services that we select. This block contains the total charge for all 3 rd party settlement services (except title services) for which the loan orginator requires and selects the provider of the service. Borrower cannot select. Services include Appraisal, credit report, tax service, flood certification, up-front MI, VA funding fee Each required service provider and their charge must be listed on a separate line The total charges for all services must be entered in the far right hand column in Block 3 These fees can change by 10%. Bucket Matching HUD line Block 4 ALL lumped together. Title Insurance Fees (Title Exam, Title Search, Binder Fee, post-closing fees….) Plus Lender’s Title. Attys are concerned about this line because it’s hard to estimate title insurance. Not cut and dry. Block 5. Owner’s Title Insurance. Los will definitely need a fee sheet here. This block must be completed on all purchase transactions regardless of whether or not the borrower intends to purchase an Owner’s Policy and regardless of whether the seller is paying for it. Refi na BLOCK 6 Required services that you can shop for (HUD Line 1301). Service provided by the loan originator where the borrower is permitted to shop. Survey, Pest inspection, etc. Each provider and their charge must be listed on a separate line. Remember the goal here. No changes.
- #27 Block 3. Required services that we select. This block contains the total charge for all 3 rd party settlement services (except title services) for which the loan orginator requires and selects the provider of the service. Borrower cannot select. Services include Appraisal, credit report, tax service, flood certification, up-front MI, VA funding fee Each required service provider and their charge must be listed on a separate line The total charges for all services must be entered in the far right hand column in Block 3 These fees can change by 10%. Bucket Matching HUD line Block 4 ALL lumped together. Title Insurance Fees (Title Exam, Title Search, Binder Fee, post-closing fees….) Plus Lender’s Title. Attys are concerned about this line because it’s hard to estimate title insurance. Not cut and dry. Block 5. Owner’s Title Insurance. Los will definitely need a fee sheet here. This block must be completed on all purchase transactions regardless of whether or not the borrower intends to purchase an Owner’s Policy and regardless of whether the seller is paying for it. Refi na BLOCK 6 Required services that you can shop for (HUD Line 1301). Service provided by the loan originator where the borrower is permitted to shop. Survey, Pest inspection, etc. Each provider and their charge must be listed on a separate line. Remember the goal here. No changes.
- #28 Block 3. Required services that we select. This block contains the total charge for all 3 rd party settlement services (except title services) for which the loan orginator requires and selects the provider of the service. Borrower cannot select. Services include Appraisal, credit report, tax service, flood certification, up-front MI, VA funding fee Each required service provider and their charge must be listed on a separate line The total charges for all services must be entered in the far right hand column in Block 3 These fees can change by 10%. Bucket Matching HUD line Block 4 ALL lumped together. Title Insurance Fees (Title Exam, Title Search, Binder Fee, post-closing fees….) Plus Lender’s Title. Attys are concerned about this line because it’s hard to estimate title insurance. Not cut and dry. Block 5. Owner’s Title Insurance. Los will definitely need a fee sheet here. This block must be completed on all purchase transactions regardless of whether or not the borrower intends to purchase an Owner’s Policy and regardless of whether the seller is paying for it. Refi na BLOCK 6 Required services that you can shop for (HUD Line 1301). Service provided by the loan originator where the borrower is permitted to shop. Survey, Pest inspection, etc. Each provider and their charge must be listed on a separate line. Remember the goal here. No changes.
- #29 The meat. Truly the epicenter of the rule. Way HUD holds lender’s feet to the fire Guts of the whole shindig Goal:simplicity, accuracy, clarity, and most of all, to encourage shopping
- #30 The meat. Truly the epicenter of the rule. Way HUD holds lender’s feet to the fire Guts of the whole shindig Goal:simplicity, accuracy, clarity, and most of all, to encourage shopping
- #31 We are on page 7 in your handout. You may want to refer to it as the writing is very hard to read on this slide. At the bottom of this chart I have written out the three categories
- #32 They are listed under each category. As an example. The charges which cannot increase—Our origination charge..etc. On the top of page 8 I have written out the corresponding blocks for you that cannot increase. You also have a copy of the new GFE in your handout which you can read later.
- #33 Purpose of this section is to show borrower how much their montly payment and settlement charges could adjust if a higher or lower rate was chosen. LO must complete the left column, not required to complete the middle and right hand column
- #34 HUD envisions the borrower will shop lender to lender, then compare cost. This is strictly for the borrower.
- #37 Today I want us to look at these changes with an open mind, however, as we review these changes, I want to identify the most complicated and troubling aspects of this rule…all of which will enable you to respond to your client’s questions and concerns. One of the concerns is actually buried on page 68,227…a decision to dump limits on loan origination fees.
- #39 Purpose of this section is to show borrower how much their monthly payment and settlement charges could adjust if a higher or lower rate was chosen. LO must complete the left column, not required to complete the middle and right hand column
- #41 Everyone will pick up their HUD-1 blank copy. Notice that on certain HUD-1 lines, the corresponding GFE Block # (i.e 31, #2, Block A is displayed off to the right on that line.
- #71 It should be noted that HUD is continuously updating this. I encourage you to stay alert. Be aware—as one atty pointed out to us, the rules and the answers to the questions don’t always match…some of the changes don’t necessarily make sense. There are several inconsistencies that I will point out. And for that reason I encouarge you to write HUD (as I have) at the Washington DC address. I often feel that people on the street like you and me – our ideas and opinions are not represented. So let’s jump in…