the final respa rule. principles of respa reform help consumers shop for the best loan shopping...
TRANSCRIPT
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The Final RESPA Rule
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Principles of RESPA Reform
• Help consumers shop for the best loan
• Shopping leads to greater competition & lower prices
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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
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Changes from
Proposed Rule
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Changes from proposed
• no Closing Script
• shorter GFE
• single application process
• removed volume based discounts
• added 30 day right to cure
• HUD-1 disclosure of key terms
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Effective
Dates
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January 16, 2009
• Servicing Disclosure Statement (Section 6)
• required use
• average cost pricing
• technical changes
January 1, 2010
• new GFE
• new HUD-1/1A
• everything else
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Good Faith Estimate “GFE”
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Good Faith Estimate
• standardized form
• key loan terms & costs
• consolidated charges
• established tolerances
• applied yield spread premiums
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GFE
Page 1
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GFE Page 1
• Important dates
• Summary of loan terms
• Escrow account information
• Summary of settlement charges
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GFE
Page 2
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GFE Page 2
• contains all costs associated with the loan
• two categories: Adjusted Origination Charges & All Other Settlement Services
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GFE
Page 3
Instructions
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GFE Page 3
• primarily an instruction page
• list of which charges can change
• tradeoff table
• shopping chart
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HUD-1
Settlement
Statement
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In General
• revised to compare with GFE
• categorized - eliminate fee proliferation
• 3rd party charges listed outside column
• added page to HUD-1/1A
• highlights key loan terms
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Right-to-Cure
Inadvertent or technical errors
not a violation of RESPA Section 4
IF revised HUD-1 is provided within
30 calendar days after settlement
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HUD-1
Page 2
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Fee Categories – 700s
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• eliminated commission percentage
• Lines 701 & 702 = commission split
• Line 703 = disbursed commission
• Line 704 = if outside settlement; P.O.C.
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700s Example
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Lines 801, 802 & 803
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Lines 804 thru 808
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Fee Categories – 900s
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Lines 901 – 904
Charges listed inside borrower’s column
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900s Example
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Fee Categories – 1000s
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Line 1001
charges listed inside borrower’s column
Lines 1002 – 1007
charges listed outside borrower’s column
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1000s Example
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Fee Categories – 1100s
Line 1101:
• includes all “Title services and lender’s title insurance” from Box 4 on GFE
• charge listed in borrower’s column
• not to be itemized unless charges by a 3rd party
• 3rd party charges cannot exceed charge by 3rd party provider
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Fee Categories – 1100s
“Title services”
Means any service involved in the provision of title insurance
(Lender’s & Owner’s)
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“Title Service”
Includes, but is not limited to…
- title examination & evaluation
- preparation & issuance of commitment
- preparation & issuance of policies
…AND
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“Title Service”
…AND
- all administrative services & processing services required to perform these functions
(e.g. document delivery, preparation & copying, wiring, endorsements, & notary)
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Summary: Inside Column
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Line 1101 – Title services & lender’s title insurance
Line 1103 – Owner’s title insurance
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Summary: Outside Column
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Line 1102 – settlement/closing fee
Line 1104 – lender’s title insurance premium & related endorsements
Line 1105 – lender’s title policy limit (coverage)
Line 1106 – owner’s title policy limit (coverage)
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Summary: Outside Column
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Line 1107 - $ of title insurance premium + endorsements retained by agent
Line 1108 - $ of title insurance premium + endorsements retained by underwriter
Line 1109 - title charges paid to 3rd parties(et seq) identified by name & service
- may add additional lines
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1100s Example
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1100s with Itemized 3rd Party Fees
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Fee Categories – 1200s
Listed in column
Line 1201 - “Government recording charges”
Line 1203 - “Transfer taxes”
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1200’s: Inside the column charges
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Fee Categories – 1200s
Listed outside column
Line 1202 – itemized recording charges
Line 1204 – City/County/Tax stamps
Line 1205 – State tax/stamps
Line 1206 – all other itemized recording & transfer services
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1200s: Outside the column charges
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Fee Categories – 1300s
Listed inside column
Line 1301 – required services that you can shop for
* Included is charges in which the borrower selects the settlement service provider & is included in GFE Box 6
(e.g. survey, pest inspection, etc.)
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1300s: Inside the column charges
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Fee Categories – 1300s
Lines 1302 et seq – additionalitemized services such as structural & environmental inspections, insuranceor home warranties
- Amounts must be listed in borrower’s or seller’s column
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1300s: Outside the column charges
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HUD-1,
page 3
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Comparison
Chart
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Comparison Chart
• compares charges listed on GFE & actual charges listed on the HUD-1/1A
• identifies tolerance compliance or violation
• 3 categories: charges that cannot increase, sum of charges that cannot increase more than 10% and charge that can increase
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Charges That Cannot Increase
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10% Tolerance
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10% Tolerance
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Charges That Can Change
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Seller (or other) Paid Items
• all charges that would go in borrower’s column; put in borrower’s column
• credit to borrower from seller; put on page 1 to offset charges in borrower’s column
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Seller (or by other) Paid Items
• credit to borrower – Lines 206 – 209
• credit to borrower from seller, charge seller on Lines 506 – 509
• credit from party other than seller, must identify party giving credit on HUD-1
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Seller credit example
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Loan
Terms
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Loan Terms
• ensures borrowers that they received loan applied they applied for
• highlights key loan terms
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Loan Terms
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Loan Terms
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Average
Charge
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Average Charge
• calculations based on specific class of transactions
• during a specific time period
- not less than 30 days
- not more than 6 months
• for a specific geographical area
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Average Charge
• charge may not exceed average calculation
• charge may not exceed TOTAL price paid to 3rd party provider
• originator must retain all documentation determining accuracy of pricing method for at least 3 years
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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)
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Required
Use
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Required Use: Definition
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“a situation in which a person’s access to
some distinct service, property, discount,
rebate, or other economic incentive, or the
person’s ability to avoid an economic
disincentive or penalty, is contingent upon
the person using or failing to use a referred
provider of settlement services”
…however
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Required Use – AfBA Exemption
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…may offer a combination of bona
fide settlement services at a total price
(net of the value of the associated discount,
rebate or other economic incentive)
lower than sum of the market prices of
individual settlement services…
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Required Use
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will not be found to have required the use as long as…
1. combination of services is optional
2. lower price is not made up elsewhere
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Miscellaneous
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• eliminated 1% cap on FHA origination fees (2.5% - new construction)
• updated reserve/escrow account language
• allowed for ESIGN applicability
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Department of Housing and Urban Development
Office of RESPA & Interstate Land Sales
Room 9154
451 7th Street SW
Washington DC 20410
(202) 708-0502
For More Information
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