Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 WELCOME RESPA 2010 “Implementation Consistency”.

Similar presentations

Presentation on theme: "1 WELCOME RESPA 2010 “Implementation Consistency”."— Presentation transcript:

1 1 WELCOME RESPA 2010 “Implementation Consistency”

2 The Goal Highlight known implementation inconsistencies and provide guidance to correct 2

3 Current Issues Inconsistencies in implementation make it difficult for consumers to comparison shop Third party originators must manage to varying requirements Settlement agents and lenders may disagree on completion of HUD-1 Settlement Statement 3

4 What Does “Restrained Enforcement” Cover? It only covers a lender if they have implemented RESPA “in good faith” –New forms MUST be used –Lenders should be abiding by the intent of RESPA Fee categories Tolerances 4

5 What Does “Restrained Enforcement” Cover? It is intended to provide lenders and HUD time to understand implementation gaps and interpretation inconsistencies and resolve them while providing RESPA benefits to the consumer Guidance will be rolled out to the industry regarding specific areas of restrained enforcement 5

6 Worksheet? HUD believes worksheets can be useful for generic rate quotes, BUT… –If a consumer asks for a GFE, the originator should disclose the information needed to provide a GFE –A consumer should not have to show “intent to move forward” to receive a GFE 6

7 Worksheet? HUD believes worksheets can be useful for generic rate quotes, BUT… –A worksheet should not look like a GFE and be clear that it is not a GFE –A worksheet should never be used “in lieu of” a GFE If a consumer has provided the required elements in a lender’s policy a GFE must be provided 7

8 Worksheet? (continued) –A worksheet used in conjunction with a GFE should contain the fee amounts as the GFE, but may provide additional items deemed important by the originator (seller credits, other non-loan fees, cash to close calculation, etc.) –If a worksheet is used as a tool during the pre- qualification or pre-approval process (a process used when there is no property address), a refinance should not be allowed 8

9 Pre-Approval - What’s Acceptable? RESPA does not prohibit providing the GFE without a property address, but there is risk for the lender due to limitations of using a “changed circumstance” RESPA does prohibit a lender from REQUIRING the consumer to verify information provided in the application prior to providing the GFE 9

10 Pre-Approval - What’s Acceptable? So, how does a lender provide a firm pre- approval without taking on risk of providing a GFE without sufficient information? 10

11 Pre-Approval - What’s Acceptable? RESPA does not want a consumer to feel bound to a lender prior to understanding the cost of their loan and being able to shop. It does not intend to prohibit a consumer from feeling confident that they qualify to shop for home! If the lender offers a pre-approval AND the consumer CHOOSES to provide documentation, it would not be prohibited 11

12 Pre-Approval - What it CANNOT be? NEVER a refinance On a purchase, a pre-approval without a GFE should only be used if the consumer has not executed a purchase contract on a property The lender should NEVER advise a consumer not to disclose their property address in order to avoid providing a GFE 12

13 Let’s move on to the GFE and HUD-1 13

14 What Have We Heard About Block 1? All of the YSP Double the YSP None of the YSP 14

15 So What’s the Right Answer? All of the YSP - sometimes Double the YSP - never None of the YSP - unlikely 15

16 WHY? Let’s go through the instruction for Block 1 16

17 So what does this mean? For wholesale loans- all fees paid to the broker, which may or may not be all or some of the YSP + lender admin and processing fees 17

18 How Does It Differ for Retail? Block 1 does not represent compensation for LO Origination points, if any, and admin and processing fees Points and/or Discount Points may be listed in Block 1 or Block 2 In Block 2, a credit would only be listed if the lender plans to pay borrower fees or part of their origination points 18

19 What are Administrative and Processing Fees? Basically all loan origination processing fees EXCEPT tax service, credit report, flood certification, life of loan flood and appraisal Includes third-party fees for services the lender uses to process or underwrite the loan Third-party fees not determined by the lender, but required will go into Block 3 - 3 rd party subordination fee, HOA certifications 19

20 Pricing Scenario Number 1 Wholesale Pricing and Wholesale Disclosure Loan Amount $200,000 Interest Rate 5% Yield Spread Premium 1% = ($2,000) Lender Administrative Fee $300 Broker Compensation $4,000 + $200 Processing Fee 20

21 21 Retail Pricing and Retail Disclosure Loan Amount $200,000 Interest Rate 5% Origination Point 1% = $2,000 Administrative Fee $500 Pricing Scenario Number 1

22 Retail Disclosure 22 Pricing Scenario Number 1 Wholesale Disclosure

23 Loan Amount $200,000Interest Rate 5.25% Lender Credit ($1,000)Origination Points 0 Lender Administrative Fee $500 Retail Disclosure 23 Pricing Scenario Number 2 23

24 Pricing Scenario Number 2 Loan amount $200,000Interest Rate 5.25% Yield Spread Premium (2.5%) Broker Compensation $4,000 + $200 processing fee Lender Administrative Fee $300 Wholesale Disclosure 24

25 Where do these fees go? Application Deposit –Does not go on GFE but will show as a credit on the HUD-1 Application Fee –Block 1 25

26 Where Do These Fees Go? Escrow Waiver Fee –Retail Block 1(if priced at initial GFE) and Block 2 has Box 1 checked Block 2 with Box 2 or 3 checked –Wholesale Netted from YSP in Block 2 with Box 2 checked Block 2 with Box 3 checked if no YSP 26

27 Where Do These Fees Go? Rate Lock Extension –Retail Block 2 with Box 2 or 3 checked –Wholesale Netted from YSP in Block 2 with Box 2 checked Block 2 with Box 3 checked if no YSP 27

28 Key Thing To Remember Adjusted origination charges (Line A) should reflect the money a consumer will have to pay for points and lender/broker fees 28

29 What About Float to Lock? Broker –Adjustment of YSP up or down will adjust the consumers cash to close –If a consumer wants to keep cash to close the same, then the broker chooses a different rate with a YSP consistent with the float YSP –Regardless, of how the YSP is adjusted, because Block 1 does not change, the broker’s compensation is constant (unless they determine that they are reducing their compensation, Block 1 can always decrease 29

30 What About Float to Lock? Retail In a worsening market, an adjustment to an interest rate dependent charge would be disclosed in Block 2 Float: 5.25% at a cost of 1% (with 1% in Block 1) Lock: 5.25% at a cost of 1.5%.5% would be disclosed in Block 2 30

31 What About Float to Lock? Retail In an improving market, downward adjustments may reduce Block 1 Float: 5.25% at a cost of 1% (with the 1% in Block 1) Lock : 5.25% at a cost of.5% Block 1 would be reduced by.5% 31

32 Moving Line A to the HUD-1 Block 1 = Line 801: to the left of the column Block 2 = Line 802: to the left of the column Line A = Line 803: in the column (any negative dollar amount will be subtracted from the borrower’s overall cost) 32

33 Important Notes about Line A and the HUD-1 Does not act as a ledger for broker compensation –Closing instructions need to include payments to be made to the broker Lender/Broker credits to the borrower are captured in Line A (Line 803 of the HUD-1). No additional 200 series credits (unless there are credits not related to the interest rate) 33

34 Important Notes about Line A and the HUD-1 If itemization to show fees credited is needed, it should be done on a HUD-1 addendum unless required by state law or governmental loan program, then on a blank line to left of the column in the 800 series. 34

35 Pricing Scenario Number 2 (HUD-1) Retail 35 Wholesale

36 Let’s Go Block by Block 36

37 Block 3 Tax Service Credit Report Appraisal (to 3 rd party) Flood Cert / LOL UFMIP 37

38 Block 3 VA Funding Fee 3 rd party Subordination Fee HOA Certification No providers disclosed on written list, as consumers cannot shop 38

39 Block 3 to the HUD-1 Move fees to 804 to 899 lines Need to list vendor to which payment is being made Credits captured in Line A of the GFE and Line 803 of the HUD-1 may not be itemized on page 2, but can be on an addendum All of these charges will move to the 10% aggregate tolerance category in the chart 39

40 Next up … Block 4 Title exam and evaluation Preparation and issuance of commitment Preparation and issuance of policies All settlement and escrow services NOTE: does not include settlement fees that are separate charges to seller (not borrower charges customarily paid for by seller) 40

41 41 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”

42 Written List May separately identify the service of conducting the closing from “title service” on the written list. List the separate providers and amount. Combined amount must equal Block 4. 42

43 Example Block 4 = $1,000 Written List Closing Company A $150 Title Agency A $850 43

44 Written List May not separate other services contained within “title services” such as notary, abstract, administrative or processing services. 44

45 Block 4? Doc Prep-Third Party Note and DOT= Block 1 (performed for a lender) Deed = Block 4 (performed for settlement) Assembling Loan Docs for Closing = Block 4 (performed for settlement) Title Review Lender only = Block 1 Buyer only = N/A For Title Commitment = Block 4 45

46 Block 5 On all purchases Basic rate Even if “paid” by seller Subject to 10% tolerance if “unshoppable” or if borrower selects provider from written list 46

47 Let’s move the Block 4 and 5 fees to the HUD-1 47

48 1100s Example 48

49 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 49

50 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 3 rd parties 50

51 Line 1102: Itemized 3 rd Party Charge 3 rd party borrower charge listed left of the column 51

52 Line 1102: Seller Charge 52 Separate seller charge in seller’s column

53 Block 6 All “shoppable” services such as: survey termite Included in 1301 & itemized in 1302 et seq Blocks 4 & 5, even if “shoppable”, does not get moved into Block 6 Possibly charges typically in Block 3, if the vendor is an affiliate of the lender 53

54 Let’s move these charges to the HUD-1 54

55 Fee category: 1300s 55

56 Block 7 Charges by state or local government to record Per page or per document recording charge 56

57 Block 8 Tax charged by state or local government Tax based on either loan amount or sales price, usually as a percentage Not just on purchases Called by many names (e.g. recordation tax, intangible tax, excise tax, doc stamps, deed stamps, mortgage stamps) 57

58 Block 8: When NOT Required? If state law attributes all to seller = $0 If state law attributes some to borrower = some Exception: If you have contract prior to issuing GFE and contract assigns MORE than state law, put the higher amount. Why?... Contract = not a changed circumstance later If contract assigns LESS than state law, put amount assigned by state law 58

59 Let’s move these charges to the HUD-1 59

60 1200s: Outside the column charges

61 Block 9 Initial deposit for escrow account If none required, put $0 Block 10 Daily interest charge Neither Blocks are subject to a tolerance 61

62 Block 11 Includes any insurance to protect property (e.g. hazard, flood, earthquake) Refinance or second: if borrower has insurance previously, may be completed with $0 Not required to be on “written list” 62

63 Comparison Chart 63

64 Separate providers If the provider of “Title service and lender’s title insurance” and the provider conducting the closing was separated on the written list three possible scenarios occur… 64

65 Three Scenarios 1. Borrower shops and chooses providers NOT on the written list 2. Borrower chooses both providers from the list 3. Borrower chooses one provider from the list and one provider not on the list 65

66 Examples Both providers NOT on list: Both providers on list: 66

67 Examples One provider on list: One provider NOT on list: 67

68 Tolerance Cure Charges exceeding tolerance not a violation of RESPA Section 5 IF cured within 30 days after settlement If cured at settlement, the HUD-1 should be revised to list the tolerance cure If cured after settlement, the revised HUD-1 must be sent to the borrower 68

69 The HUD-1, Cure and the 10% Aggregate Tolerance Bucket $1,015 x 1.10 = $1,116.50 maximum tolerance increase allowed $1,440 - $1,116.50 = $323.50 $323.50 is listed as a lender credit to cure in Lines 204 – 209 69 Page 3 of HUD-1 Page 1 of HUD-1

70 HUD-1 Example List a credit to cure for charges that exceed the tolerance threshold Example: If the difference is attributed to a specific line item 70

71 Questions 71

Download ppt "1 WELCOME RESPA 2010 “Implementation Consistency”."

Similar presentations

Ads by Google