NEW HUD RULES AND RESPA REFORM January 22, 2010 Julie M. Palmaccio, Esquire Cushing & Dolan, P.C. Attorneys At Law 375 Totten Pond Road, Suite 200 Waltham, MA (P) (F)

2 EFFECTIVE DATE January 1, 2010 New GFE and HUD-1

3 NEW GFE Lender or Mortgage Broker Must provide New 3 Page GFE To all Potential Borrowers Within 3 Days of Application Without cost to Borrower –Except the cost of the credit report

4 NEW GFE cont’d To Include –Name –Social Security Number –Loan Amount –Estimated Property Value –Monthly Income –Property Address Without an address it is simply a pre-qualification

5 NEW GFE cont’d

6 Page 1 –Loan Amount –Loan Terms –Rate and Lock Date

7 NEW GFE cont’d Requirements for –Escrows –Prepayment Penalties –Balloons –Adjustments

8 NEW GFE cont’d Dates: –Rate Quote –Rate Lock –Fees Quote

9 NEW GFE cont’d Loan Amount –Term –Rate –Payment –Features –Escrows

10 NEW GFE cont’d

11 NEW GFE cont’d Page 2 –Origination Fee –3 rd Party Loan Fees –Title Fees –Owners Title Insurance (separate) –Other Services –Recording Fee –Transfer Tax (if on GFE buyer must pay with front page credit) –Escrows –Interest –Homeowners Insurance

12 NEW GFE cont’d Availability –Prices and terms quoted must be good for 10 business days after issuance of the GFE –If no further action by potential borrower after 10 business days lender/broker no longer bound by GFE

13 NEW GFE cont’d

14 NEW GFE cont’d Page 3 –Tolerances –Three Categories Zero Tolerance 10% Tolerance Unlimited Tolerance

15 NEW GFE cont’d Zero Tolerance –Lender Charges for “doing” the loan –Points or Origination Fees –Transfer Tax

16 NEW GFE cont’d 10% Tolerance –Aggregate of all charges –Lender required settlement services where lender selects or borrower selects from a lender provided list –Title Services and Title Insurance –Recording Fees

17 NEW GFE cont’d Unlimited Tolerance –Services where borrower selects the provider –Escrows –Per diem –Homeowners Insurance

18 NEW GFE cont’d Page 3 also contains a chart for comparing different loans

19 NEW HUD-1 First Page unchanged –Except space added for Settlement Agent’s phone number

20 NEW HUD-1 cont’d

21 NEW HUD-1

22 NEW HUD-1 Second Page –Made to look like the GFE –Fees divided by “Box” Number –801 & 802 “Outside the Column” (in text area only) –803 “In the Column” (what is charged to the borrower) – “In the Column” – “In the Column” –1001 “In the Column – “Outside the Column” –1100 Series “Title Charges”/Box 4 Charges Title Exam Document Preparation Attorney Fee Lender’s Title Insurance –Owners Title Insurance Premium Disclosed Separately

23 NEW HUD-1

24 NEW HUD-1 Page 3 –Completely New –GFE Estimates Left column –HUD1 Actual Right column –Grouped by Tolerance –Bottom of the Page Recap of loan terms

25 GFE/HUD-1 Inadvertent of Technical Error –Not a violation if revised HUD1/1A is provided to borrower and /or seller with 30 calendar days Variation on the Tolerances –Not a violation if the lender reimburses the borrower any amount by which the tolerances were exceeded at settlement or within 30 days thereafter. Change of Circumstances –Acts of God –Inaccurate Info used to prepare GFE –New Information not relied on to prepare GFE –Particular Information regarding the transaction

26 GFE/HUD-1 Many aspects of the new GFE and HUD-1 remain untested and unclear HUD offers some guidance via Frequently Asked Questions (FAQs) posted on their website at fices/hsg/ramh/res/resparulefaqs.pdf