RESPA Changes Effective January 1, 2010
The Department of Housing and Urban Development (HUD) made significant changes to the Real Estate Settlement Procedures Act (RESPA) that are intended to create a better understanding and visibility to the consumer of the overall settlement process. Below are key provisions:
1. Establishes a standard three (3) page Good Faith Estimate (GFE), to be implemented by January 1, 2010.
2. Provides that GFE may be provided after the lender receives information that it regards as necessary in a single application. RESPA revised the definition of an application.
3. Limits the fee associated with the GFE to the cost of the credit report.
4. Imposes tolerances associated with fees disclosed on the new GFE..
5. Provides "changed circumstances" that result in higher fees, or borrower ineligibility, for the loan as a basis for providing a revised GFE.
6. Continues to require disclosure of mortgage broker fees but requires that the lender indicate that credits or charges are part of "the origination charge".
7. Permits disclosure of average pricing on the GFE and HUD.
8. Establishes a three (3) page HUD-1 and a two (2) page optional HUD-1A with a new third page for the borrower to compare estimated charges from the GFE and the final charges from the HUD-1 / HUD-1A.
9. Conform the transfer of mortgage servicing disclosure to statute.
10. Remove outdated escrow accounting provisions.
11. Clarify that RESPA disclosures are subject to the Electronic Signatures in Global and National Commerce Act (ESIGN).
12. Eliminated 1% cap on FHA origination fees (2.5% for a new construction) .
It is believed that this reform will reflect the following basic principals:
*· Help consumers shop for the best loan.
*· Shopping leads to greater competition and lower prices.
*· Preserve a competitive market for all settlement service providers.
*· Key final terms of the loan disclosed to the borrower at closing.
Here is a summary of changes to the HUD:
*· The new HUD-1 consists of three (3) pages instead of two (2). Changes to the HUD-1 form were made to allow for comparison to the GFE, and to provide a better uderstanding of loan terms, conditions, and charges from a transaction to the borrower/buyer.
*· Page 1 of the new HUD-1 remains similar to the existing HUD-1 with only minor changes.
*· Page 2 of the new HUD-1 consists of changes which include changes to HUD-1 line items to show references to the appropriate GFE Sections for the fees.. Other changes include the concept of fees rolling up into a single fee in the charge column for easier comparison on page 3 of the HUD-1. One example is line 1101 which is now designated as "title services and lender's title insurance." This line will now reflect the total of all settlement fees as one sum in the charge column. Fees such as doc prep, courier, etc. will no longer be itemized.
*· The new Page 3 is specifically designed for translating amounts from the GFE to the HUD-1 for comparison with fees listed on Page 2 of the HUD-1 form. The associated sections on page 3 are separated into 3 sections depending on the associated tolerance for the fees. Section 2 for "charges that in total cannot increase more than 10%" also includes a total and percentage % field for the borrower to clearly see if any fee tolerance violations have resulted.
*· The new page 3 also contains a "Loan Terms" section to assist the borrower in comparing the loan terms stated on the GFE. The escrow officer/settlement agent is now required to enter key terms about loan features as a summary on Page 3.
*· Lenders will be allowed to use the new GFE form prior to January if they choose, but in doing so they are subject to the regulation associated with it.
#2 Reading the new rules and becoming familiar with some terminology.
*· GFE and the concept of fee tolerances. This is intended to give the consumer complete visibility to costs associated with their loan. There are 3 fee tolerance categories: charges that cannot increase charges that can increase up to 10% at settlement, charges that can change at settlement.
*· It is the lenders role to manage fee tolerance variations. Your role is to proceed with the signing and to direct borrowers' questions to the lender.
*· Changed Circumstance. A significant event that would result in higher fees or affect borrower's eligibility for the loan as a basis for providing a revised GFE. Examples of changed circumstance: divorce, death of one of the borrowers, natural disaster, significant change in home's appraised value triggering certain loan terms.
Additional reading materials may be obtained from the following websites. Please copy and paste the address to your URL.
http://www.hud. gov/offices/ hsg/ramh/ res/respa_ hm.cfm
http://www.realtor. org/GAPublic. nsf/files/ respaqa.pdf/ $FILE/respaqa. pdf
http://www.alta. org/respa/ index.cfm
Many Thanks to Busy Bee Mobile Notary for alerting me to thies changes
Wednesday, December 16, 2009
Thursday, December 10, 2009
Where to set up and sit during a signing. Normally I like to set things up on the dinning room table with all the signers on my left, and move the documents in a clock-wise direction and end up with the signed papers on my right that way keeping all the documents in the same order that they are to be sent back to the escrow or title company. However the other day I went to a borrowers home, one borrower sat down on one side of the table and the other sat on the other across from each other leaving me a seat in the middle. I politely asked them if we could change things a little bit to make it easier for "them" to be sitting next to each other and be able to see and discuss the documents that they were signing. It did not take to much prodding to get them to move together, but due to preferred seating of one of the signers I ended up having to go in a counter clockwise direction. Not a major problem to get used to changing my method and in the end the rest of the signing went off with out a hitch. Giving credence to the fact one can be professional and courteous at the same time and will usually be responded with the same. Remember you as a professional signing agent will be the conductor and set the tone for the rest of the signing.