new respa regulations for mortgage finance: are you...

New RESPA Regulations for Mortgage Finance: Are You Ready?

Complying With the Sweeping Changes inpresents Complying With the Sweeping Changes in Real Estate Settlement Procedures

presents

A Live 90-Minute Teleconference/Webinar with Interactive Q&A

Today's panel features:Richard J. Andreano, Partner, Patton & Boggs, Washington, D.C.

Donald E. Partington, Executive Vice President, Legal and Strategic Affairs, Fidelity National Title Group, Santa Ana, Calif.

Tuesday, February 23, 2010

The conference begins at:1 pm Easternp12 pm Central

11 am Mountain10 am Pacific

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The New RESPA Regulations for Mortgage FinanceThe New RESPA Regulations for Mortgage Finance??Are You Ready??

An Introduction to the New RESPA RuleAn Introduction to the New RESPA Rule

Donald E. Partingtong

Stated Principles of RESPA Reform

1 Help consumers shop for the best loan1 Help consumers shop for the best loan

2 Shopping leads to competition and lower prices

3 Loan terms fully disclosed at closing

Key Features of the New RESPA Rule• 3-page Good Faith Estimate (GFE)3 page Good Faith Estimate (GFE)

• Disclosure of YSP’s as a credit to consumer

• Tolerance limitations on settlement charges

• 3-page HUD-1 Settlement Statement• 3-page HUD-1 Settlement Statement

• Average Charge

• Agent and Underwriter split disclosed on HUD-1

• Lender is responsible for transmitting GFE data and• Lender is responsible for transmitting GFE data and all information necessary for completing the HUD-1 to the settlement agent

Final RESPA Rule

When Is the Rule Effective?When Is the Rule Effective?

Most of the new rule’s requirements became effective January 16, 2009

The new Good Faith Estimate (GFE) The new Good Faith Estimate (GFE) and HUD-1 must be used on transactions originated on or after January 1, 2010January 1, 2010

Transactions originated prior to January 1, 2010 using the old GFE form will close using the old HUD-1 form will close using the old HUD 1 form

4

N RESPA R l ti f M tNew RESPA Regulations for Mortgage Finance: Are You Ready?

The New Good Faith EstimateThe New Good Faith Estimate

Richard Andreano

GFE TriggerGFE Trigger• The receipt of an application triggers the need for a loan

originator to provide a Good Faith Estimate (GFE).– A “loan originator” is a mortgage broker or a lender.

• An “application” is the submission of a borrower’s financial ppinformation in anticipation of a credit decision that includes the following six minimum items of information:– Borrower’s name.– Borrower’s Social Security Number to obtain a credit report.– Borrower’s income.

Property address– Property address.– Estimate of the property’s value.– Loan amount sought.

6– Plus, any other information the loan originator deems

necessary.

GFE T iGFE Trigger• Although additional information can be required to have an

application, this can have adverse consequences.– The originator is presumed to have relied on the six minimum

items of information, and any additional required items of information, that constitute an application when a GFE is issued.

• Can a GFE be issued without all six minimum items of information?– Yes, but the originator is deemed to have received and relied

on the six minimum items of information.

7

GFE T iGFE Trigger• A consumer cannot be required to provide verification

documentation as a condition of issuing a GFE.

– A loan originator may not require the borrower to sign consents to verify employment, income or deposits as a condition of y p y , pissuing a GFE.

– A borrower may voluntarily sign consents prior to the issuanceA borrower may voluntarily sign consents prior to the issuance of the GFE to facilitate the loan process.

• A consumer cannot be required to acknowledge receipt of a GFE• A consumer cannot be required to acknowledge receipt of a GFE as a condition to issuing a GFE.

8

Ti f t I GFETimeframe to Issue GFE• A loan originator must provide a GFE within three business days

of the receipt of an application.

– A “business day” for this purpose remains any day on which the offices of the loan originator are open for conducting g p gsubstantially all of its business operations.

• The period to issue a GFE once an application is received is notThe period to issue a GFE once an application is received is not revised.

But there is a significant change when both a mortgage– But there is a significant change when both a mortgage broker and a lender are involved.

If l d t li ti f b k th t i d9

– If a lender accepts an application from a broker that issued a GFE, the lender is bound by the GFE.

Ti f t I GFETimeframe to Issue GFE• A GFE is not required when the application is denied or

withdrawn in the three business day period.– Previously a GFE was not required only if the loan was

denied within the three business day period.

• A Settlement Cost Booklet also must be provided along with a GFE for purchase money transactions.– The RESPA rule still provides that the Booklet is not requiredThe RESPA rule still provides that the Booklet is not required

when a loan application is denied within the three business day period.

– No conforming change was made to the RESPA ruleNo conforming change was made to the RESPA rule regarding withdrawn applications.

• HUD advises in the FAQs that a Settlement Cost Booklet is not10

• HUD advises in the FAQs that a Settlement Cost Booklet is not required in cases in which a loan is withdrawn within the period.

GFE R l t d F R t i tiGFE-Related Fee Restriction• The rule provides that other than a credit report fee, a loan

originator may not impose a fee on a consumer before the consumer receives a GFE.– If the GFE is mailed, the consumer is deemed to receive the

GFE three calendar days after mailing, exclusive of Sundays and Federal holidays in 5 USC 6103(a).

• HUD advises in the FAQs that a fee beyond a credit report fee Q y pmay be imposed after a loan applicant both receives a GFE andindicates an intention to proceed with the loan covered by the GFE.– Don’t forget the MDIA rule fee restriction.

• A fee beyond a credit history fee may not be imposed before the consumer receives the creditor’s initial Truth in

11 Lending Disclosure Statement.

GFE I iti l A il bilitGFE Initial Availability• When a GFE is issued, the GFE terms must be available for at

least 10 business days, except for the interest rate and the interest rate-dependent charges, and the related loan terms.– The general “business day” definition applies—a day on

which the offices of the loan originator are open for conducting substantially all of its business operations.

• The interest rate-dependent charges are:p g– The credit or charge (points) for the rate chosen.– The adjusted origination charges.

Per diem (or daily) interest– Per diem (or daily) interest.

• There is no minimum period of availability for the interest rate or th i t t t d d t h

12the interest rate-dependent charges.

GFE T lGFE Tolerances• If within the 10 business day-period, or such longer period that

the loan originator may specify, the consumer expresses an intent to proceed with the loan covered by the GFE, the GFE is binding subject to both tolerances on charge increases and exceptions.

– The rule does not indicate how a consumer must express an intent to proceed.

– It is advisable to specify a reasonable method that the consumer must use to express an intent to proceed.p p

13

GFE T lGFE Tolerances• There are three tolerance categories:

– 0% tolerance—no charge increase permitted.

10% bucket tolerance charges in total may not increase by– 10% bucket tolerance—charges in total may not increase by more than 10%. There is no limit on the amount a specific charge may increase, except for the overall 10% cap.

– No tolerance—no limit on increases in charges.

14

GFE T lGFE Tolerances• 0% tolerance:

– Government transfer taxes.– Our origination charge.– Credit or charge (points) for the interest rate chosen, when

the rate is locked.– Adjusted origination charges, when the rate is locked.

• 10% bucket tolerance:• 10% bucket tolerance:– Government recording charges.– Charges for loan originator-required services when the

i i t l t th ifi idoriginator selects the specific provider.– Charges for loan originator-required settlement services, title

services, required title insurance and owner’s title insurance, h th id id tifi d b th

15when the consumer uses a provider identified by the originator.

GFE RevisionGFE—Revision • There are three exceptions that permit a loan originator to revise

a GFE.

– Changed circumstances.

– Borrower-requested changes.

Newly constructed homes– Newly constructed homes.

• With a changed circumstance or borrower-requested change, l th h ff t d b th h d i tonly the charges affected by the changed circumstance or

borrower-requested change may be increased.– Revisions of the applicable charges may be made without

d t th t l16

regard to the tolerances.

GFE R i iGFE—Revision• Changed circumstances include:

– Acts of God, war, disaster or other emergency.

Information regarding the borrower or loan relied on in– Information regarding the borrower or loan relied on in providing the GFE that changes or is found to be inaccurate.

N i f ti di th b l– New information regarding the borrower or loan.

• Changed circumstances do not include:

– Market price fluctuations.

17 – Loan originator errors.

GFE R i iGFE—Revision• The exceptions for changed circumstances and borrower-

requested changes operate the same way.

• If there is a changed circumstance or borrower-requested change, within three business days the loan originator may:

– Deny the loan (if applicable).– Issue a revised GFE revising only the applicable chargesIssue a revised GFE, revising only the applicable charges.

• HUD advises in the FAQs that when a broker and lender are involved the three business day period begins to run wheninvolved, the three business day-period begins to run when either the broker or lender first learns of the changed circumstance or borrower-requested change.

18 • The general “business day” definition applies.

GFE R i iGFE--Revision• If a loan originator provides a revised GFE based on the

exceptions, it must document the reason(s) that a new GFE was provided and retain the documentation for no less than three years.

• HUD advises in the FAQs that if there is a changed circumstance resulting in a revised GFE, the mortgage broker and lender each must retain documentation of the reasons supporting the revision.− Presumably, HUD takes the same position with a borrower-

requested change.

19

GFE R i iGFE--Revision• The newly constructed home exception is available when

settlement is expected to occur more than 60 days after the GFE is provided.

• In such a situation, the loan originator may provide along with , g y p gthe GFE a separate, clear and conspicuous disclosure stating that at any time up until 60 calendar days before closing the originator may issue a revised GFE.

• HUD advises in the FAQs that if a use and occupancy permit has been issued for the home prior to issuance of the GFE, then p ,the home is not considered to be under construction and the transaction would not be a new home purchase for purposes of the exception.

20

Ch i A h t GFE Di lChange in Approach to GFE Disclosures• Paid outside of closing (POC) items cannot be separately

itemized or designated on the GFE. The totals in the GFE include amounts paid at or outside of closing.

• All charges typically paid by the borrower must be shown as g yp y p yborrower-paid, even if it is known that a third party, such as the seller, will pay the charges.

• Fees that typically are charged to a third party, such as the seller, and not to the borrower do not have to be included in the GFE.– Caution is advised when excluding fees from the GFE based

on the assumption they will be paid by the seller or another third party.

21

p y

Change in Approach to GFE DisclosuresChange in Approach to GFE Disclosures• Special Rule: Title charges are included in the GFE whether the

borrower, seller or loan originator will pay the charges.– Apparent exception—when a separate charge is imposed on

the borrower and on the seller to conduct the settlement, the portion imposed on the seller can be excluded from the GFE.

• The GFE does not account for all charges that the borrower may have to pay, such as:

– Property taxes payable at or before closing.– Development fees apportioned to a buyer by a builderDevelopment fees apportioned to a buyer by a builder.– The fee for an HOA disclosure package.

If th t t l h fi t li l d22

• If there are two separate loans, such as a first lien loan and a piggyback loan, two separate GFEs must be provided.

GFE F S b t ti ll Ch dGFE Form Substantially Changed• The new GFE form is three pages with 13 main sections.

• The GFE is a prescribed form. Only expressly authorized changes may be made.– Additional pages may not be added to the GFE and theAdditional pages may not be added to the GFE, and the

pagination of the GFE may not be changed.– Signature lines may not be added to the GFE.

• If a borrower separately acknowledges receipt this is not• If a borrower separately acknowledges receipt, this is not an expression of intent to proceed.

P itt d h• Permitted changes:– Additional lines may be added to Blocks 3, 6, and 11.– The GFE may be on legal size paper.

23 – The shading and margins in the GFE may be changed.

GFE Page 1GFE—Page 1

24

GFE I t t D tGFE—Important Dates

• Float Situation:

• HUD advises in the FAQs that if a lender does not offer a rate lock, enter “Not Applicable” or “NA”.– HUD does not provide the same advice when a lender offers

rate locks.

• When floating, no minimum period applies to the period of 25

g, p pp pavailability in Line 1.



• Line 2 is for non rate dependent settlement charges and• Line 2 is for non-rate dependent settlement charges and addressed shortly.

• Line 3 must be completed even when the rate is floating.U l k i d i t f th t t d– Use a lock period appropriate for the rate quoted.

– However, the number of days entered should take into account factors affecting the settlement date, such as the right to rescind

26right to rescind.

• Line 4 indicates the required period to lock before closing.



• This is the example from the sample GFE• This is the example from the sample GFE.– Line 3: Note that the Line shows the full 30 day lock period

upon which the quoted rate is based. Th l fl t it ti i hi h th l• The example can reflect a situation in which the loan would not be subject to the right to rescind, or under the lender’s lock policy the loan only must close within the lock period

27

lock period.


• Lock Situation:

• If the rate is locked in:• If the rate is locked, in:– Line 1: Insert the date the lock expires.– Line 3: Insert the appropriate number of days based on the

t l k i d d t ki i t t f t ff ti thrate lock period and taking into account factors affecting the settlement date, such as the right to rescind.

– Line 4: Insert “NA”.

28


• Settlement Charges:

• When a GFE is mailed the minimum 10 business day period for• When a GFE is mailed, the minimum 10 business day period for settlement charges in Line 2 is measured from the date the GFE is mailed.

• If a revised GFE is provided based on a changed circumstance• If a revised GFE is provided based on a changed circumstance or borrower-requested change after the shopping period ended and the borrower expressed an intent to move forward with the transaction, Line 2 must be completed by entering the same

29

transaction, Line 2 must be completed by entering the same date from the last GFE.

GFE L SGFE—Loan Summary

• Note, this section may not be changed. For example:All loans must be shown as monthly payment loans– All loans must be shown as monthly payment loans.

• The initial interest is the rate applicable on the closing date.– Do not insert the annual percentage rate.

30– The note rate may not be the applicable rate on the closing

date.

GFE L SGFE—Loan Summary

• For the initial monthly payment, show the payment for principal, interest and if applicable mortgage insuranceinterest and, if applicable, mortgage insurance.– Exception: If higher, show the accrued interest for the first

regularly scheduled payment, plus mortgage insurance.

31

GFE E A tGFE—Escrow Account

• Insert the monthly payment from the Loan Summary.– Generally the monthly payment will be the payment for

principal, interest and, if applicable, mortgage insurance.– Do not include the monthly escrow payment.– Simply show whether or not there will be an escrow

account.

• The estimated monthly escrow payment amount is not a GFE item.

32


33

GFE Adjusted Origination ChargesGFE—Adjusted Origination Charges

• Block 1 is for Our origination charge and includes all charges g g gthat the lender and, if applicable, mortgage broker will receive from any source, except any charge for the specific interest rate chosen (points).– This includes processing, application, administration,

underwriting, document preparation, wire, lender inspection, mortgage broker, loan handling and other miscellaneous

34fees, even if paid to a third party.


• Block 2 is for the credit or charge (points) for the rate chosen.• Retail transaction general rule: In a transaction without a

mortgage broker, the lender may elect to use either Box 1 or Box 2 or 3.– If the lender elects to use Box 1 to reflect that the credit or

charge for the rate chosen is included in Block 1, then “0” is entered in Block 2.

35 • Exception: If there is no positive or negative amount that would be entered in Block 2, then Box 1 must be used.


• Wholesale transaction: If there is a mortgage broker, then Box 1 in Block 2 may not be used—either Box 2 or Box 3 must be used.

• Box 2 and Box 3 may not be checked in the same transaction—a credit and charge may not occur in the same transaction.– HUD advises in the FAQs that there may not be a credit for

36 a yield spread premium and a charge for discount points in the same transaction.


• The guidance on the determination of whether a credit or charge exists is cumbersome and HUD appears to recognize that more guidance is needed. In the interim, here is a way to think about the credit or charge—If the net result of the loan pricing is that the lender:– Is contributing to the transaction based on the rate such as by

paying the broker and/or paying closing costs, there is a credit.– Is requiring the borrower to pay an amount for the rate such as a

di i d/ b d f h i h37

discount point and/or temporary buy-down fee, there is a charge.


• Example 1: $100,000 loan. Lender fees of 1% paid by the borrower p p yand broker compensation of 1.5% paid by the lender.– Block 1 shows $2,500 ($1,000 in lender fees and $1,500 in broker

compensation).p )– Block 2 shows a negative $1,500 (the lender credit).– Block A shows the net of $1,000.

38


• Example 2: $100,000 loan. Lender fees of 1%, broker compensation p pof 1.5% and 1 discount point. All to be paid by the borrower.– Block 1 shows $2,500 ($1,000 in lender fees and $1,500 in broker

compensation).p )– Block 2 shows a positive $1,000 (the discount point).– Block A shows a total of $3,500.

39


• Example 3: A loan with $1 115 in originator compensation and• Example 3: A loan with $1,115 in originator compensation and discount points of $5,978.53.– This is the example from the sample GFE.

Thi l ill b d l t f th lk th h f th HUD 1– This example will be used later for the walk through of the HUD-1.

40


• Tolerances:– The 0% tolerance applies to Block 1.– The 0% tolerance applies to Blocks 2 and A, when the rate is

locked.locked.– The 0% tolerance applies to each Block separately.

41

GFE—Adjusted Origination ChargesGFE—Adjusted Origination Charges

• The Our origination charge amount in Block 1 may not change based solely on the interest rate going from float to locksolely on the interest rate going from float to lock.

• HUD advises in the FAQs that the Our origination charge amount may increase in the following situations:

If th i h d i t th t ff t th l t d ll– If there is a changed circumstance that affects the loan amount and all or any portion of the origination charge is calculated as a percentage of the loan amount.

– If the borrower requests a different loan product or the borrower is no42

If the borrower requests a different loan product or the borrower is no longer eligible for the loan product, but is eligible for a different loan product.

GFE Block 3GFE—Block 3

• Block 3: Includes each service required by the originator for which the q y goriginator will select the provider, or require the borrower to choose from a list of providers approved by the originator .– Enter each service and the charge for each service, with the total g

in Block 3.– Additional lines may be added if needed to show all charges.

43 • The items in Block 3 are subject to the 10% bucket tolerance.


• Block 4: Enter the total for all title services, premiums and endorsements (but not owner’s title), regardless of who selects or pays for the title provider.

• HUD advises in the FAQs that:HUD advises in the FAQs that:– Title services include:

• The charge for conducting the settlement.Processing and administrative services such as document• Processing and administrative services, such as document delivery, preparation and copying, wiring, and notary.

Th i Bl k 4 i bj h 10% b k l if h44

• The amount in Block 4 is subject to the 10% bucket tolerance, if the consumer uses a title provider identified by the loan originator.


• Block 5: Enter the total for owner’s title premiums and endorsements, regardless of who selects or pays for the title providerregardless of who selects or pays for the title provider.– For non purchase transactions, you may enter “NA” or “Not

Applicable”.U l k th t h d id– Unless you know the consumer wants enhanced coverage, provide the quote for basic coverage.

– HUD has indicated that if the consumer later indicates that he or she t h d thi ld b h d i twants enhanced coverage, this would be a changed circumstance.

• The amount in Block 5 is subject to the 10% bucket tolerance, if the 45

consumer uses a title provider identified by the loan originator.


• Block 6: Includes each service required by the originator for which the originator will permit the consumer to shop for the provider.– Enter each service and the charge for each service, with the total in

Block 6.– Additional lines may be added if needed to show all charges.

• If you allow the borrower to shop for the provider of one or more services you a o t e bo o e to s op o t e p o de o o e o o e se cesin Blocks 4, 5 or 6, you must provide the consumer with a written list of providers for the applicable services along with the GFE.

• The items in Block 6 are subject to the 10% bucket tolerance, if the 46

j % ,consumer uses providers identified by the loan originator.

GFE Blocks 7 & 8GFE—Blocks 7 & 8

Bl k 7 E t th t t l ti t d di h D t t• Block 7: Enter the total estimated recording charges. Do not enter transfer taxes.

– The amount in Block 7 is subject to the 10% bucket tolerance.

• Block 8: Enter the total estimated transfer taxes. Do not enter recording charges.

– The amount in Block 8 is subject to the 0% tolerance47

The amount in Block 8 is subject to the 0% tolerance.


• Block 9: Enter the total required escrow or impound deposit at l i t ki i t t th t dj t tclosing, taking into account the aggregate adjustment.

– Indicate if the required escrow or impound deposits are for allproperty taxes, all insurance and any other specified items.

– If deposits are required for some, but not all, property taxes or insurance, do not use the “all” box.

• Check the “other” box and identify the applicable taxes or insurance.

48 • The amount in Block 9 may change without limit.


• Block 10: Enter the total per diem (or daily) interest.

• In the blanks, enter the amount of interest for each day, the number of days and the estimated settlement date.

• The amount in Block 10 may change without limit.

49


Bl k 11 I l d h t f i d h d i il i• Block 11: Includes each type of required hazard or similar insurance, such as flood insurance and earthquake insurance.

– Enter each required insurance and the premium for each insurance, with the total in Block 11.

– Additional lines may be added if needed to show additional premiums.

50 • The amount Block 11 may change without limit.

GFE Bl k B & A BGFE—Blocks B & A + B

• Block B: Enter the total of the estimated charges that appear in Block 3 through Block 11.

• Block A + B: Enter the sum of Block A (Your adjusted originationBlock A B: Enter the sum of Block A (Your adjusted origination charges) and Block B.

51


52

GFE T l I f tiGFE—Tolerance Information

• This section explains the tolerances to the consumer.

• The loan originator does not enter any information in this section.

53

GFE T d ff T blGFE—Tradeoff Table

• This section is intended to show the relationship between the interest rate and closing costs.

• The loan originator must complete the left column based on the loan covered by the GFE.Th l i i t d t h t l t th th t l

54• The loan originator does not have to complete the other two columns.

GFE Sh i Ch tGFE—Shopping Chart

• The loan originator does not enter any information in the shopping chart. HUD intends that consumers can use the chart to compare loans

55loans.

GFE Violation and CureGFE—Violation and Cure• A violation of the GFE requirements will constitute a violation of

RESPA Section 5.

• Currently, there are no express damages or penalties for violations of RESPA Section 5.

– HUD has asked Congress to change this.

– RESPA violations often trigger state law violations.

A i i t t l i l ti t ithi 30 l d• An originator can cure a tolerance violation at or within 30 calendar days after closing.

56• The curing of tolerance violations will be addressed in greater detail

later in the presentation.

Thank You

Richard Andreano

Washington, DC

[email protected]

57

The New RESPA Rule

The New HUD 1 Settlement StatementThe New HUD-1 Settlement StatementDonald Partington

The New Settlement Statement

HUD-1 Settlement Statement – 700 section

Real Estate Broker Fees

• Generally unchanged• Generally unchanged

• Percentages removed

HUD-1 Settlement Statement – 800 sectionLender’s Origination ChargesLender s Origination Charges

• All of lender’s own charges –no itemization

• Lines 801 and 802 outside borrower’s column

HUD-1 Settlement Statement – 800 sectionLender-Required Services/Lender Lender-Required Services/Lender Required Providers

- 3rd party services itemized, t h i b ’ amount shown in borrower’s

column


Advance Payments to Lender

• Daily Interest Charges

M t I P i• Mortgage Insurance Premium

• Homeowner’s Insurance

HUD-1 Settlement Statement – 1000 sectionReserves Deposited with LenderReserves Deposited with Lender

• New Roll-up line 1001 –aggregates all reserve deposits and aggregate adjustment into and aggregate adjustment into one number for comparison to GFE 9.

All i di id l id f • All individual reserves outside of borrower’s column


Title Services and Lender’s Title

• Roll-up in to Line 1101 for comparison to GFE 4comparison to GFE 4

• Title Services – all services necessary for the closing of the transaction

• Itemization limited to Closing Fee and Lender’s Title


Owner’s Title Insurance

• Separate itemization inside the borrower’s column for comparison to GFE 5

• Must be shown in the borrower’s column regardlessof who pays for the policyp y p y


Title Agent/Underwriter Splitg / p

• Shows the premium split between underwriter and agent for all title insurance agent for all title insurance premiums


G R di ChGovernment Recording Charges

• Borrower fees are itemized outside the column and roll-up in pto Line 1201 for comparison to GFE 7.

• Attachments to HUD-1 • Attachments to HUD 1 permissible.


Transfer TaxesTransfer Taxes

• Includes Deed and Mortgage Transfer Taxes

• Transfer taxes may be shown in the seller’s column; however, lender beware.

HUD-1 Settlement Statement – 1300 sectionAdditional Settlement ChargesAdditional Settlement Charges

• Required Shopable Services roll-up to line 1301 for comparison to GFE 6GFE 6

• Normal use of 1300 section remains- ancillary payments, etc.y p y

HUD-1 Settlement Statement – Page 3 • Loan originators are• Loan originators are required to provide all information needed to complete the comparison chart and loan terms disclosure• It is expected that lenderswill provide information in a variety of waysvariety of ways

• GFE plus SSPL• Supplemental

Instructions• Proforma HUD-1

HUD-1 Statement “0” Tolerance Comparison

• Any line where HUD-1 amount is greater than GFE amount is a is greater than GFE amount is a violation

• Each line is a separate tolerance

• No offsets for lower fees on other lines

HUD-1 Statement- 10%” Aggregate Tolerance

• Items Included

• Government Recording Fees

• Lender Required Services-Lender Required Provider

• Lender Required Shopable Lender Required Shopable Services – Provider on SSPL

• Aggregate 10% tolerance –offsets from other items offsets from other items permitted

• Tolerance violation = greater than 10% excess of HUD-1 aggregate v. GFE Aggregate

HUD-1 Statement- 10%” Aggregate Tolerance

HUD-1 Statement – “No” Tolerance• Items Included

• Initial Escrow Deposit (Line 1001)

D il I t t Ch • Daily Interest Charges (Line 901)

• Homeowner’s Insurance (Line 903)

• Lender Required Shopable Services – Provider NOT on Services Provider NOT on SSPL

• Borrower selected services

• Amount for any HUD-1 charge may exceed the GFE charge by any amount

HUD-1 Statement – “No” Tolerance

• The lender is responsible for the cure of tolerance

Tolerance Violations• The lender is responsible for the cure of tolerance violations and they have 30 days after closing to discover and repay the overages

• Available to lenders if they repay the consumer any charges that exceed tolerances on settlement services in the zero and 10% tolerance categories of the GFE; Otherwise,zero and 10% tolerance categories of the GFE; Otherwise, the overages will be considered a violation of RESPA

• Closing agents also have 30 days to cure any errors or omissions on the HUD-1

• Lenders will likely run most tolerance violation payments 1through settlement, so an amended HUD-1 can be issued.

• A tolerance violation does not stop a closing. But….

HUD-1 Statement – Loan Terms – Page 3

• Intended as a comparison of the loan terms quoted at GFE stage to the loan terms at stage to the loan terms at closing

•GFE loan terms do not match HUD 1 l Addi i l HUD-1 loan terms - Additional information is required

HUD-1 Statement – Loan Terms – Page 3

HUD-1 Settlement Statement – Page 1

Page 1 Issues

• Page 1 remains virtually unchanged

N /M difi d U• New/Modified Uses

• Secondary Financing

• Seller adjustments• Seller adjustments

• Rule-imposed adjustments

• Contractual adjustments• Contractual adjustments

• Tolerance Adjustments/Cures


Secondary Financing

l d• No longer appropriate to document two loans on the same HUD-1

• “One loan – One HUD”

• Net Proceeds of 2nd loan shown in 200 section


Seller Adjustments

l d d• Rule Imposed Adjustments –adjustments for owner’s title and title services w/lender’s title insurance

• Contractual Adjustments


Tolerance Cures

• Documentation of cures through gclosing and outside of closing (POC)

• Used for both 10% aggregate and zero tolerance cures zero tolerance cures

•Tolerance – restitution or penalty?

Average Charge Pricing

What is Average Charge Pricing?What is Average Charge Pricing?

• Allows all settlement service providers to use • Allows all settlement service providers to use average charge for services obtained from third parties, such as recording and courier fees

• Excludes any service based on the value of the property or loan (such as any type of insurance)or charges of the settlement provider itselfg p

• Imposes a 3 year recordkeeping requirementand the total average charge over the utilized time period must not exceed the total paid for those services to third parties (no upcharge)

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Average Charge Pricing

Which Charges May Not Be Averaged?Which Charges May Not Be Averaged?

• Any charge that changes based upon the amount of the purchase price or loan amount

• Transfer Tax• Mortgage Tax• Insurance Premiums

(including title insurance premiums)

• A provider’s own charges

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How do you calculate an average charge?How do you calculate an average charge?

Average Charge PricingHow do you calculate an average charge?How do you calculate an average charge?

• A specific class of transactions• Refinance• Resale• All Transactions

A ifi hi • A specific geographic area• County• State• Nationwide• Nationwide

• A specific averaging time period• From one to six months• From one to six months

ALL TRANSACTIONS FITTING THE CRITEREA ALL TRANSACTIONS FITTING THE CRITEREA MUSTMUSTUSE THIS CHARGEUSE THIS CHARGE!!

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RESPA ReformThe New RESPA Regulations for Mortgage FinanceThe New RESPA Regulations for Mortgage Finance

Are You Ready??

Thank you.

Donald Partingtong

EVP, Legal and Strategic Affairs

Fidelity National Title Group

[email protected]

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new respa regulations for mortgage finance: are you...

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