HUD's explanation on 2010 Good Faith Estimate and 2010 HUD1

1. The Final RESPA Rule

2. Principles of RESPA Reform
• Help consumers shop for
the best loan
• Shopping leads to greater
competition & lower prices
2

3. 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
3

4. Effective Dates
January 16, 2009 January 1, 2010
• Servicing • new GFE
Disclosure
Statement • new HUD-1/1A
• elimination of 1%
• average charge
cap on FHA
• technical changes origination fees
4

5. Servicing
Disclosure
Statement
5

6. GFE
6

7. GFE Notice Requirements
• provided no later than 3 business days
by hand, mail, fax, email
• not required if application denied or
withdrawn by borrower
• may be provided by mortgage broker,
but lender is responsible
7

8. GFE Triggers
• borrower’s name
• Social Security number
• property address
• monthly income
• house value or best estimate
• amount of loan
… & any other information
8

9. GFE
Page 1
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10. Important Dates
10

11. Summary of your loan
11

12. Summary of your loan
12

13. FHA Monthly Interest
The monthly accrual of interest
on an FHA loan is not considered
a prepayment penalty.
13

14. Escrow account information
14

15. Summary of your settlement charges
15

16. GFE
Page 2
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17. Block 1, “Our Origination Charge”
Must contain ALL charges by
ALL loan originators in the transaction
17

18. Old GFE vs. New GFE for Loan Origination Fees
origination fee/point mortgage broker fee
processing doc prep
commitment application
wire MERS registration
underwriting delivery/courier
admin doc review
electronic miscellaneous
“Our Origination Charge”
18

19. Block 2, Your Credit or Charge
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20. Example
20

21. All Other Settlement Services
21

22. Written List
If a loan originator permits a borrower to
shop for services (Block 4, 5 & 6), the
loan originator must provide a written
list of providers that the estimates
were based on.
22

23. Written List
• Must be provided with GFE on a
separate piece of paper
• Must include at least one provider of
each shoppable service.
23

24. 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”
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25. All Other Settlement Services
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26. GFE
Page 3
Instructions
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27. Which charges can increase
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28. Tradeoff table
28

29. Shopping Chart
29

30. Changed Circumstances
• Acts of God, war, disaster or other
emergency
• changed or inaccurate information
provided by borrower after issuance
of GFE
(e.g. credit quality, loan amount,
property value, or other information)
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31. Changed Circumstances
If circumstances changed affecting
settlement costs or loan:
• provide revised GFE within 3 days
• revised GFE may reflect only the
increased charges
31

32. Borrower Requested Changes
Loan originator may provide
new GFE within 3 days
32

33. Interest Rate: not locked
If borrower does not lock
interest rate within time period &
the interest rate changes, a new
GFE must be issued
33

34. Expired GFE
If borrower does not express
intent to proceed with the loan
after 10 business days, or longer
if specified by originator, the GFE
is considered expired.
34

35. New Home Purchases
If settlement is anticipated to be
more than 60 days after GFE,
originator may disclose on separate
piece of paper that the GFE may be
revised any time up to 60 days
before settlement is anticipated.
35

37. HUD-1
Settlement
Statement
37

38. Lines 204 – 209: principal amount of
additional loans
May also show 2nd loan proceeds
38

39. Seller (or other) Paid Items
• all GFE charges; put in borrower’s
column on the HUD-1
• credit to borrower from seller in Lines
206 – 209 &Lines 506 – 509
• credit from party other than seller,
must identify party giving credit on
HUD-1
39

40. Seller credit example
40

41. HUD-1
Page 2
41

42. 700s Example
42

43. Line 801 & 802: listed outside column
Line 803: listed inside column
43

44. IRS: Origination Point Disclosure
May be disclosed in Line 801…
or…
44

45. Place asterisk in Line 801 &
reference on bottom of page 2 on the HUD-1.
45

46. Lines 804 thru 807: charges in
borrower’s column
46

47. Lines 901 – 904: charges inside column
47

48. Line 1001: charges listed inside column
Lines 1002 – 1007: charges listed outside column
48

49. 1100s - Title service: definition
“Title services”
Means any service involved
in the provision of title insurance
49

50. 1100s - Title service
Includes, but is not limited to…
- title examination & evaluation
- preparation & issuance of commitment
- preparation & issuance of policies
- all administrative services & processing
services required to perform these
functions
50

51. 1100s Example
51

52. Line 1102: Itemized 3rd Party Charge
3rd party borrower charge listed outside column
52

53. Line 1102: Seller Charge
Separate seller charge in seller’s column.
53

54. 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
54

55. 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
3rd parties
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56. 1200’s: Inside the column charges
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57. 1200s: Outside the column charges
57

58. Fee category: 1300s
58

59. HUD-1,
page 3
59

60. Comparison
Chart
60

61. Charges That Cannot Increase
61

62. 10% Tolerance
62

63. 10% Tolerance
63

64. 10% Tolerance
64

65. Charges That Can Change
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66. Right-to-cure: tolerance
Charges exceeding tolerance
not a violation of RESPA Section 5
IF cured within 30 days after
settlement
66

67. Loan
Terms
67

68. Loan Terms
68

69. Loan Terms
69

70. Right-to-cure: errors
Inadvertent or technical errors
not a violation of RESPA Section 4
IF revised HUD-1 is provided within
30 days after settlement
70

71. Average
Charge
71

72. 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)
72

73. From
the
FAQs…
73

74. FAQs
Q: If a loan originator contracts loan
document preparation to a third party,
is this a separate charge on the GFE
and the HUD-1?
74

75. FAQs
A: No, loan loan document
preparation is a processing and
administrative service in the
origination of a loan and is included
in Block 1 of the GFE and should not
be separately itemized.
75

76. FAQs
Q: If there is a “changed
circumstances”, when does the loan
originator issue a new GFE?
76

77. FAQs
A: When there is a “changed
circumstances” and the loan
originator intends to issue a revised
GFE, the loan originator must do so
within three business days of
receiving information sufficient to
establish changed circumstances.
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78. FAQs
Q: If a borrower pays some of the
origination charge prior to closing,
how should it be disclosed on the
HUD-1?
78

79. FAQs
A: The charge for origination must
be shown on Line 801 of the HUD-1
to the left of the borrower’s column in
the 200 series.
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80. FAQs
Q: If a charge was calculated using
average charge, may the charge
be waived or discounted?
80

81. FAQs
A: Yes. Discounting or waiving a
charge calculated using average
charge is permitted.
81

82. FAQs
Q: If state law requires further
itemization of title service, title
insurance related fees, or title
policy endorsements, how should
these fees be listed on the HUD-1?
82

83. FAQs
A: Those fees may be itemized on
blank lines in the 1100 series –
charge outside the borrower’s column.
Endorsements may be listed in Lines
1103 & 1104 – charge outside the
borrower’s column.
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84. FAQs
Q: If borrower purchases a Lender's &
Owner's title insurance policy &
receives a simultaneous issue
discount, is the discounted amount
for the Lender's policy listed in Line
1104 on the HUD-1?
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85. FAQs
A: Yes, the settlement agent must
record the actual charge of the
lender’s title insurance premium
& related endorsements in Line
1104.
85

86. FAQs
Q: If a borrower selects an attorney
to represent the borrower‘s
personal interests at settlement,
where is this attorney‘s fee
disclosed on the HUD-1?
86

87. FAQs
A: May be separately listed on a
blank line in the 1100 series in
borrower‘s column with the name
of the attorney & the type of
service provided.
87

88. FAQs
Q: Should the loan originator quote
the charge for a basic owner‘s title
insurance policy or an enhanced
owner‘s title insurance policy on
the GFE?
88

89. FAQs
A: Loan originator should quote rate for
the basic owner‘s title insurance policy.
If borrower chooses an enhanced
owner‘s policy before GFE is issued,
loan originator should quote the rate for
an enhanced policy.
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90. Department of Housing and
Urban Development
Office of RESPA & Interstate Land Sales
451 7th Street SW, Room 9154
Washington DC 20410
(202) 708-0502
hsg-respa@hud.gov
www.hud.gov/respa
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