“RESPA Reformation” Putting The Pieces Together! This presentation is not for distribution to the public. 11/30/2009

Background Information  Six years to draft proposed reform  Two proposed rules  One final rule – withdrawn  Seven round tables nation wide  Over 50,000 comments  Countless comments from Public  Final Rule issued in Fall of 2008 with an effective date of January 1,

The Purpose  Improve customer’s ability to shop & compare multiple offers  Increase accuracy of settlement charge estimates  Ease of comparing the GFE to the final HUD-1 and identifying changes  Limit when and how much settlement charges can increase between GFE & HUD-1 3

Overview of Changes  Defines what information constitutes an “application”, triggering the need to deliver an initial GFE  Introduces a new, standardized GFE form  Introduces a new term, “changed circumstances”, to describe when a lender is permitted to increase or add fees  Revises the HUD-1 Settlement Statement (HUD-1A for refinances)  Establishes tolerances or restrictions for increasing fees between the initial GFE and the final HUD-1, outside of a “changed circumstance”  Allows lenders to correct any errors or violations in fee changes within 30 calendar days from settlement 4

GFE Triggers – New Application Defined  Borrower’s name  Social security number  Property address  Monthly income  House value or best estimate  Amount of loan  Other information that may be required by lender 5

Fees Charged at Application  Until the applicant has received the GFE only the reasonable cost of a credit report may be charged. This is similar to the new MDIA restrictions implemented in July of 2009 which impacted the delivery of the TIL Note: Prior to collecting any funds, lender must be in compliance with MDIA as well as RESPA 6

The New Good Faith Estimate  Standardized form  Key loan terms & costs  Consolidated charges  Established tolerances  New application definition for RESPA purposes  Timing still three (3) business days from RESPA application  Settlement charges must remain available for 10 business days  Provide an interest rate for a specified time until locked. 7

Let’s Walk Through the new GFE! The first page of the new form clearly summarizes the loan terms in an easy-to-read format.  Provides the originator’s name, address, phone number and address  Discloses important expiration dates for the settlement charge estimates and interest rate locks, including deadlines for locking in a floating interest rate  Describes the terms of the loan with important details regarding rate and/or payment increases and prepayment penalties  Notifies the client if an escrow account is required, and if so, the amount owed  Summarizes the total estimated settlement charges 8

The new GFE – Page 2 On the second page, estimated settlement charges are grouped into two main categories and better defined so that customers can understand the different types of costs. The two categories are: A. “Your Adjusted Origination Charges” origination charges are the fees paid to the lender. Examples: Origination and/or discount points Administrative fee Underwriting fee Processing fee Broker Fees YSP All other lender-related fees B. “Your Charges for All Other Settlement Services” are charges are fees paid to third parties. Examples:Appraisal and credit report fees Flood Cert, Tax Service, Title services and insurance Recording fees and transfer taxes Escrow-related charges Per diem interest A + B Total Estimated Settlement Charges 9

The new GFE – Page 3 The final content page contains additional instructions for the customer. “Understanding which charges can change at settlement” Explains which fees can change between the initial GFE and the final HUD-1. There are 3 categories: ◘ Charges that cannot increase ◘ Charges that can increase up to 10% in aggregate ◘ Charges than can change “Using the tradeoff table” Indicates what the loan would look like with lower settlement charges versus a lower interest rate “Using the shopping cart” Assists the customer in making a comparison of GFE’s from different lenders 10

Tolerances Three Categories of Settlement Charges Fixed Fees – No change allowed –Lender’s charges – processing, origination, underwriting, lock-in fee, transfer tax, YSP (Yield Spread Premium), discounts, Buy-down 10% tolerance –Appraisals, credit reports, flood cert, tax service, [UW fee paid to 3 rd party, processing fee paid to 3 rd party] lender selected 3 rd party providers –Lender required & recommended 3 rd party selected by borrower – title charges, abstracts, closing services, etc. –Owner’s title insurance –Government recording charges No restrictions –Lender required services where borrower shops and selects i.e. title closing services, etc. –Initial Escrow Deposits –Daily interest charges –Home owners insurance 11

Correcting Differences in Fees  If there is a difference in charges between the GFE and the HUD-1 that falls outside of tolerance, the lender has sole responsibility for correcting the violation.  The lender must correct the violation preferably at closing or within 30 days after settlement by sending the difference to the borrower. 12

Changed Circumstances  “Changed Circumstances” allows originator to provide revised GFE in limited instances.  Adjustments to fees are only permitted if a changed circumstance justifies the increase or addition.  If a “Changed Circumstance” justifies the delivery of a revised GFE, only the charge(s) directly impacted by the changed circumstance may be increased or added.  A revised GFE must be provided with in three(3) business days of the changed circumstance. 13

Changed Circumstances continued  “Changed Circumstances” includes: –Acts of God, war, disaster or other emergencies –New information not collected at application –Information collected at application that was inaccurate  Revised GFE may also be given when: –Borrower requests changes –Borrower locks in rate –New construction if disclosed that new GFE will be provided up to 60 days before closing  Documentation of any changed circumstance must be maintained for at least three(3) years. 14

The New HUD-1  Modifies page 2 to compare costs disclosed on GFE  Groups previously itemized lender and title insurance charges into single fees –Breaks out settlement/closing fee from bundled title service fee if the vendor providing the settlement/closing service is different than the vendor providing the title service –Continues to itemize agents and title underwriting portions of premium  Adds a 3 rd page with a comparison chart between GFE fees and Final HUD-1 fees –Includes summary of loan term –Includes the tolerance comparison of GFE and final HUD-1 numbers  Requires lenders to supply settlement agent with all information necessary to complete the HUD-1, in a format that allows the closing agent to simply fill in the blanks. 15

Let’s look at each page of the HUD-1 HUD-1 REVISIONS - PAGE 1 In order to make the HUD-1 lineup with the GFE, the HUD-1 has been revised. All amounts paid on behalf of the borrower must now be reflected on page one of the HUD-1 because the GFE does not reflect amounts paid by third-parties. With this exception, page one remains largely unchanged. If a third party (lender, realtor, seller, etc.) pays for a charge that was included on the GFE, the charges would still be listed in the borrower’s column but with an offsetting credit shown on page one. If the buyer charge is seller-paid, the charge would also be shown as a debit to the seller. 16

HUD – 1 Revisions – Page 2 HUD-1 REVISIONS – PAGE 2 The lines on page 2 have been modified to reflect the new settlement cost groupings that appear on the GFE. New summary lines with references to corresponding lines on the GFE have been added. This allows the customer to easily compare their estimated and actual costs. Section 700: The sales commission percentage is no longer shown Section 800: There is no longer a breakdown of lender-retained charges. Section 1100: Title charges are no longer shown itemized; however, they are broken out in slightly more detail than what appears on the GFE. 17

HUD – 1 Revisions – Page 3 HUD-1 REVISIONS – PAGE 3 Similar to the GFE, this new page describes the tolerances for fee differences and provides a side-by-side comparison of the estimated and actual charges. Additionally, it summarizes the loan terms to make sure the customer is fully aware of their mortgage financing costs. 18

Questions and Answers! Thank you for your participation today! Still have questions? Please call your Home Team at United Country Home Mortgage at (888) This information is provided for the Real Estate/Mortgage Professional and is not an advertisement to extend consumer credit as defined by Sec of Regulation Z. Information is subject to change without notice. This presentation may not be modified or reproduced in whole or part for distribution. 11/30/2009 Member FDIC 19