Showing posts with label REspa. Show all posts
Showing posts with label REspa. Show all posts

Thursday, October 3, 2013

Real Estate Settlement and Procedures Act






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Estimated Length: 3 hours

Cost: $55.00 (USD)

Credits: 3

Enrollment Valid For: 1 year



Description



Real Estate Settlement and Procedures Act


Comprehensive coverage of the RESPA including Regulation X, the GFE, and the HUD-1



Expert



Vince Danzi



Vincent G. Danzi graduated from the University of Texas at Austin with a Bachelor’s degree in History in 1995 and earned his law degree in 2000 from the State University of New York at Buffalo.  Prior to law school, he was a Licensure Investigator for the Texas State Board of Medical Examiners.  Since law school, he has worked in the title insurance and settlement services industry.  He serves as General Counsel for Equity Settlement Services, Inc., a national title and settlement services provider, which offers a wide range of services across a thirty-five state footprint.  Outside this role, his practice includes business legal representation, consulting, and serving in an of-counsel and outside expert capacity on RESPA and other compliance and title insurance issues.  In accord with his enduring devotion to computer programming, he is also a database application and user interface developer.  He lectures, writes, and otherwise contributes to the publications and seminars of such organizations as The New York State Land Title Association, the Title Appraisal Vendor Management Association, October Research, The New York State and Suffolk County Bar Associations, and is a member of the Editorial Advisory Board of October Research’s The Legal Description, the nation’s leading legislative and legal analysis newsletter for the title insurance and settlement services industry.  Mr. Danzi was a featured speaker at the 2011 National Settlement Services & Compliance Summit in Cleveland, Ohio, at which he spoke on best practices for the title insurance industry





Real Estate Settlement and Procedures Act

Sunday, March 24, 2013

RESPA Rules on Agents

This article is a good summary what you need to ask yourself if there is a chance of a RESPA violation.  The article comes from Raealtor Mag


A home sale cannot be conditioned on the use of a specific title insurance company. Violators can face stiff penalties.

MARCH 2013 | BY PHILLIP L. SCHULMAN

It’s not unusual for a listing agent to have a favorite closing agent and want the buyer to close the transaction using that agent, along with the agent’s title insurance and settlement services. What many practitioners don’t realize, however, is that Section 9 of the Real Estate Settlement Procedures Act prohibits sellers from conditioning the home sale on the use of a specific title insurance company, and in fact violators can be subject to penalties, with the most -typical being a fine of up to three times the amount of the title insurance fee.


READ MORE



RESPA Rules on Agents

Friday, January 20, 2012

2012 State of the industry

October Research has published there 2012 "State of the Industry".  It is available for free at http://www.thetitlereport.com/TTR/IndustryReport2012.aspx .  It contains sections about:

Real Estate
Gradual housing recovery expected, but sleeper issues creeping up

Title Insurance
Distressed market to define title insurance business in 2012


Homebuilders
Homebuilders in 2011: Bubble states hold down housing starts


Mortgage
Consumer confidence improves, but mortgage markets remain constricted


Appraisal
Appraisal industry battles continue into 2012


Settlement Services Law
Business-changing issues loom in 2012


RESPA
RESPA in 2012: The evolution of a titan


The Dodd-Frank Act
Dodd-Frank in 2012: big issues, little certainty

 

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Friday, December 2, 2011

Supreme Court Hears Arguments On Whether RESPA Violation Is An Injury In Fact

WASHINGTON, D.C. -- The U.S. Supreme Court heard arguments on Nov. 28 on whether a property owner suffered an injury in fact under the Real Estate Settlement Procedures Act (RESPA) when she bought title insurance from a company that allegedly paid kickbacks to get business from title insurance agents in Ohio (First American Financial Corp. v. Denise P. Edwards, No. 10-708, U.S. Sup.). 

(Transcript.  Document #85-111223-001T.)

 

Denise P. Edwards sued First American Financial Corp. in the U.S. District Court for the Central District of California.  She alleged that First American violated RESPA's anti-kickback provision by entering into exclusivity agreements with thousands of title insurance agencies that are authorized to sell First American title insurance policies.  Under RESPA's remedies, Edwards seeks treble damages for the $455 cost of her title insurance. 

The District Court denied First American's motion to dismiss for lack of standing.  On appeal, the Ninth Circuit U.S. Court of Appeals affirmed. 

Questions Presented 

The Supreme Court agreed to hear two questions:  whether the Ninth Circuit erred in holding that Edwards has standing to sue under RESPA when she does not claim that the violation affected the price, quality or other characteristic of the settlement services, and whether Edwards has standing to sue under Article III, Section 2, of the U.S. Constitution when she does not have an injury in fact.

 Justice Stephen G. Breyer questioned whether Edwards was suing because she was exposed to a transaction that Congress "said was harmful."  Aaron M. Panner of Kellogg, Huber, Hansen, Todd, Evans & Figel in Washington, arguing for First American, said no, because Edwards paid the only rate for title insurance that is available under Ohio state law. 

Justice Ruth Bader Ginsburg said Edwards' claim "does seem to fit the bill of restitution, unjust enrichment cases, where the plaintiff doesn't have to prove any harm, she just gets back what the defendant should not have received."  Panner said Edwards is not "worse off" because there is no allegation that the insurance was lacking. 

'Prearranged, Tied Product' 

Justice Sonia Sotomayor said Panner seems to be arguing that "Congress can't ever presume damages or injury, that even in those cases plaintiff has to come in and prove that they would have paid less."  She continued:  "So what more does this plaintiff have to allege other than, if I had been told that this was a prearranged, tied product between the mortgage and the title company, but that I had a right to get an untied product even at the same price, and I would have exercised that right if I had known - would that be enough?" 

Panner said that is not what Edwards is alleging.  He said a "violation of the statutory right does not create an injury for constitutional purposes." 

Justice Breyer told Panner "there is no doubt that the plaintiff here suffered the harm that Congress sought to forbid.  That harm was being engaged in a transaction where the title insurance company was not chosen on the merits, but partly in terms of a kickback."  He asked what was unconstitutional about that. 

Panner said there was no injury in fact under Article III "and Congress cannot create that injury legislatively." 

Trust Violation? 

Justice Antonin Scalia asked if Congress could create a trust relationship between title insurance agents and property purchasers that would constitute an Article III injury in fact.  "If you become a trustee by contract you get one result, but if you are a trustee by government decree so that you must be a trustee, contract or not, somehow the situation changes?" he asked.  

Justice Elena Kagan said Panner's argument that there is a difference depending on the source of the law is "very much inconsistent with our case law."  She said her reading of Edwards' complaint is that she doesn't have to prove injury because "there's been a judgment made that these kinds of practices tend to decrease service and tend to increase price and therefore I don't have to prove those matters.  And that's the exact same judgment that is made in the trust cases, for example." 

Panner said that Congress could broaden the law to require enforcement of violations by the executive branch.  "But what Congress cannot do is to dictate in advance that a particular practice has cause injury to a particular plaintiff." 

'Duty Of Loyalty' 

Jeffrey A. Lamken of MoloLamken LLP in Washington, arguing for Edwards, said that breaches of a duty of loyalty by taking kickbacks have been a part of common law for which a plaintiff can sue without showing an economic harm. 

Justice Scalia told Lamken:  "There is no duty of loyalty owned here."  The justice added:  "I'm not even sure it's proper to call it a kickback.  It's a commission." 

Lamken told Justice Scalia that Congress gave consumers a right to "freedom from a particular conflict of interest, and that is the kickbacks that undermine their incentive to serve your best interest, that undermine their incentive to choose the insurer that provides the best quality and the best service." 

Justice Samuel A. Alito Jr. said he doesn't see a fiduciary relationship and doesn't see where a duty of loyalty comes from.  He added that he does not see an injury in fact. 

Permit Private Suits? 

Justice Scalia told Lamken:  "The issue isn't whether Congress can achieve that result [of legal protection].  It's whether they can achieve it by permitting private suits." 

Chief Justice John G. Roberts Jr. questioned whether Edwards suffered an injury in fact or an injury in law.  He said he thinks it is the latter. 

The chief justice also told Lamken that Edwards claim of "potential value" "sounds to me like possible future injury." 

'Circular' 

Justice Anthony M. Kennedy told Lamken, "[i]t's circular for you to say that he was denied something that he is entitled to.  The question is whether there is an injury.  The Constitution requires an injury." 

Appearing on behalf of the federal government, Assistant Solicitor General Anthony A. Yang of the U.S. Department of Justice in Washington, told the court:  "When an individual has a statutory right to a kickback-free referral in a financial transaction, she participates in a particular financial transaction in which her right is violated and she pays money for the service unlawfully referred, she has sustained an Article III injury in fact based on, as this Court in its repeatedly explained test, an invasion of a legally protected interest." 

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Tuesday, July 12, 2011

HUD and FNF Settle RESPA Kick-Back Charges to the Tune of $4.5 Million

The U.S. Department of Housing & Urban Development (HUD) has announced an agreement with Fidelity National Financial Inc. (FNF) to settle allegations the title company paid real estate brokers and other settlement service providers improper kickbacks or referral fees in violation of the Real Estate Settlement Procedures Act (RESPA). HUD claimed FNF and its affiliates and subsidiaries engaged in a widespread and years-long campaign to pay real estate brokers kickbacks for the referral of real estate settlement services, including home warranties and title insurance. FNF agreed to cease this practice and pay HUD $4.5 million to resolve the complaint.

“RESPA is very clear that paying fees or providing anything of value for the simple act of referring business is a violation of law,” said Acting FHA Commissioner Robert Ryan. “This agreement should be a signal to others that these business practices won’t be tolerated.”

HUD alleges that Fidelity National Financial Inc. (FNF), through its subsidiaries, paid fees for the referral of settlement service business in violation of Section 8 of RESPA. To facilitate these payments, real estate brokerages entered into “Application Service Provider Agreements” which provided the real estate brokerages access to TransactionPoint, a web-based platform that automates the real estate transaction from listing to closing. This online system also allows the brokers to select real estate settlement providers for a particular real estate transaction. The real estate brokerages, in turn, entered into Sub-License Agreements with subsidiaries of FNF to enable FNF’s subsidiaries to be listed in TransactionPoint as a provider of settlement services. As part of the Sub-Licensee Agreement, HUD alleges that FNF’s subsidiaries paid the real estate brokerages a fee for each referral of real estate settlement services.

 RESPA was enacted in 1974 to provide consumers advance disclosures of settlement charges and to prohibit illegal kickbacks and excessive fees in the homebuying process. Section 8 of RESPA prohibits a person from giving or accepting anything of value in exchange for the referral of settlement service business.

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Monday, July 11, 2011

RESPA Technical Corrections and Claifying ammendments

the government printing office has just  published this information about the new GFE

This final rule makes technical corrections and certain clarifying amendments to HUD’s RESPA regulations promulgated by a final rule published on November 17, 2008. The majority of the regulations promulgated by the November 17, 2008, final rule became applicable on January 1, 2010. Now that the regulations have been in use for a little over one year, HUD has identified certain needed technical corrections, which this rule will make, and certain other regulatory provisions in which additional clarification would be helpful.

 

     

FR-2011-07-11.pdf Download this file

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Sunday, May 29, 2011

Real: Clearer mortgage disclosure forms proposed | ScrippsNews

The new consumer finance regulator has proposed simplified mortgage disclosure forms, aiming to ensure that borrowers receive clear and easy-to-understand information about home loans when they apply for credit.

The Consumer Financial Protection Bureau released two alternative mortgage disclosure forms, each taking only the front and back of a sheet of paper. The forms would combine and replace the current two-page Truth in Lending Act disclosure and the three-page good faith estimate required under the Real Estate Settlement Procedures Act, or RESPA. The bureau, created by last year's Dodd-Frank financial reform law, will test the prototypes and incorporate feedback through September. It's calling the effort the "Know Before You Owe" project.

"A home loan is the biggest financial commitment most Americans will make in a lifetime," says Elizabeth Warren, who runs the bureau. "With a clear, simple form, consumers can better answer two basic questions: Can I afford this mortgage? And, can I get a better deal somewhere else? That's good for American families and the markets they depend on."

The prototypes emphasize the monthly loan payment, interest rate, potential cautions and other loan features.

Under Dodd-Frank, the bureau must propose new rules for simplified mortgage forms before July 2012. Staff started drafting the prototypes "quickly out of the gate" in consultation with federal regulators who have been working on streamlining the forms for years, Warren says.

The agency expects five rounds of evaluation and revision, with consumer testing in five cities and input from the industry, before the forms are finalized this fall. Then, the bureau will publish proposed regulations and a draft model form to solicit more comment and run quantitative tests before the rules are final.

Financial industry executives praise the move. "We think it's a great step," says Scott Talbott, senior vice president for government affairs at the Financial Services Roundtable. "If everybody fully understands the product ... both the consumer and the lender win."

The Mortgage Bankers Association's more guarded response notes that the industry spent significant money 18 months ago on RESPA changes -- costs borne by consumers.

"Making mortgages easier to understand for prospective borrowers has been a long-term priority for the mortgage industry and we are pleased to see the initial prototypes take a step in that direction," MBA President David H. Stevens said in a statement, noting the challenge of "trying to strike the right balance between simplification and providing as much information as possible to help borrowers make the most informed choices."

Alex J. Pollock, a resident fellow at American Enterprise Institute who proposed a one-page form in 2007, notes the average mortgage closing form is 80 to 85 pages, which could be boiled down. He says the proposed forms don't include the ratio of debt to income, a key factor in whether individuals can afford a loan.

"The real object of this is not to give someone a piece of paper that they passively consume but to get them to actively think about the borrowing commitment," Pollock says.

Even as Warren prepares the new consumer bureau to assume regulatory power July 21, Wall Street lobbyists and their Republican allies in Congress seek to curb the bureau's power. Pending House legislation would replace the director position with a five-member bipartisan commission and make it easer for other regulators to overturn CFPB rules. President Barack Obama is expected to appoint Warren as director during an upcoming congressional recess, given that 44 Republican senators have pledged to block any director nomination.

"This is all part of a unified campaign to weaken and delegitimize the agency," says David Arkush, director of Public Citizen's Congress Watch division, which supports the bureau and Warren as director. "If you had some basic consumer protections in the financial services arena, there's a really good chance the housing bubble wouldn't have gotten as large as it got and you wouldn't have had so many predatory lending and mortgage abuses."

x x x x

With interest rates on U.S. Treasuries continuing to fall and a new study showing continuing declines in home prices nationally, mortgage rates edged slightly lower this week.

The benchmark fixed-rate 30-year mortgage dipped by 2 basis points, averaging 4.75 percent in the latest Bankrate weekly survey. A basis point is one-hundredth of 1 percentage point.

Another popular home loan product, the 15-year fixed-rate mortgage, made an identical decline, falling 2 basis points to an average of 3.93 percent. With 30-year jumbo mortgages, or generally those for more than $417,000, the average rate was 5.21 percent, off by a single basis point.

With adjustable-rate mortgages, the 5/1 ARM was 3.45 percent, off 3 basis points.

(Distributed by Scripps Howard News Service. Reach Katherine Reynolds Lewis at editors(at)bankrate.com.)

REAL ESTATE WATCHMust credit bankrate.com

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Thursday, May 19, 2011

New Loan Disclosure Forms Unveiled

In one of its first concrete actions meant to benefit consumers, the new Consumer Financial Protection Bureau (CFPB) has released two versions of a simplified mortgage disclosure form to be provided to borrowers.

The new form is intended to replace two documents currently provided to borrowers, the Truth in Lending Disclosure and the Good Faith estimate. Those forms, which are required by law, provide a borrower with specific information about the mortgage they are seeking, including the interest rate, monthly payment, loan fees and, in the case of an adjustable-rate mortgage, the maximum monthly payment the loan can reset to over time.

The present forms are two and three pages long, respectively, and present much of the same information. Both versions of the proposed form present most of the same information in a single document with more simplified language.

“The current forms can be complicated and difficult for consumers to use,” said Elizabeth Warren, acting head of the CFPB. “They are also redundant and can be costly for lenders to fill out. With a clear, simple form, consumers will be in a better position to answer two basic questions: Can I afford this mortgage and can I get a better deal somewhere else?”

The bureau is posting the two proposed versions of the form on its web site, under the project heading Know Before You Owe, to obtain feedback from consumers and the mortgage industry before committing to a final design.

The CFPB plans to conduct evaluations of the draft forms over the summer. The final form and accompanying rules for use are due to be released by July 2012 for public comment.

The new agency was directed to create a new mortgage disclosure form by last year’s Dodd-Frank Wall Street Reform and Consumer Protection Act, which also created the CFPB itself.
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Monday, January 24, 2011

Big Lenders May Lose With Simpler Mortgage Disclosure - Bloomberg

The Consumer Financial Protection Bureau said it will soon begin writing and testing a simplified mortgage-disclosure form aimed at making it easier for borrowers to compare deals from different lenders.

The bureau expects to award a contract to develop the form by the end of the month, making it one of the first projects of the new agency, according to a bidding document given to vendors in November and reviewed by Bloomberg News.

More concise disclosure is one of the main stated goals of Elizabeth Warren, the Obama administration adviser charged with setting up the agency established by the Dodd-Frank Act. Simpler forms that can be directly compared may make the market less lucrative for lenders such as Bank of America Corporation, Wells Fargo & Company, JP Morgan Chase & Co. and Citigroup Inc.

“If buyers are better informed and understand the financial commitments they are entering into, they will be better able to make comparisons among lenders and the market will be more competitive,” said Alex Pollock, a former banker who is a resident fellow at the American Enterprise Institute. “In competitive markets, profit margins are -- and should be -- driven down to the level of the cost of capital.”

Academic studies have shown that comparison shopping aided by the emergence of the Internet helped cut prices for consumer products including term life insurance in the 1990s. That squeezed profits, said Edward Graves, an associate professor of insurance at The American College in Bryn Mawr, Pennsylvania.

Lost Margins

“When you see what’s gone on in terms of prices, the insurers have lost a lot of margin in this product,” Graves said in an interview.

Bob Davis, an executive vice president at the American Bankers Association, said short disclosure forms might not simplify the process as much as Warren suggests, because of the “interconnected requirements” imposed by federal law.

“It’s not so simple as creating two pieces of paper,” Davis said in an interview. Bankers agree with Warren’s “starting point,” he said.

Warren has said she would like to see a standard document of one or two pages to replace about 80 percent of the mortgage disclosures mandated by the Truth In Lending Act and the Real Estate Settlement Procedures Act. The current “pile of papers” confuses consumers and is costly to business, Warren has said.

Smaller community banks might become more competitive with Wall Street if new regulations succeed in reducing costs, Davis added. “The compliance process lends itself to certain scale and big technology solutions,” Davis said.

Mortgage Unit Head

Along with the credit-card division, the new bureau’s mortgage unit may have the most immediate impact on consumer financial services. A candidate to run the mortgage section is Patricia McCoy, a University of Connecticut law professor who has been working with Warren part-time, according to a person briefed on the matter who spoke on condition of anonymity because the matter isn’t public.

McCoy, 56, is a former corporate litigator who was a partner at Mayer, Brown & Platt during the savings and loan crisis in the early 1990s. Based in Washington, she represented bank auditors and examined residential loans and underwriting standards. She co-wrote a book published this month on the subprime lending crash.

The contract to create a new disclosure form was advertised to selected vendors in November by the Bureau of Public Debt at the Treasury Department, where the consumer bureau is housed until it becomes an independent entity in July. It calls for firms to bid on providing “support services to assist with the design of a model disclosure form, including assessment of the form through consumer testing and revisions to the form resulting from the testing and public comments,” according to the copy obtained by Bloomberg News.

January Contract

Bids had to be in by Dec. 14, and the contract will be awarded before the end of January, according to the proposal document. The vendor must complete the work by Jan. 15, 2012 or a year after the contract is awarded, whichever is earlier.

Dodd-Frank requires the bureau to propose regulations on mortgage disclosures for public comment by July 21, 2012. The bidding document indicates that the bureau intends to move more quickly, saying its goal is to issue proposed regulations “as soon after” July 21, 2011, “as possible.”

The bid request also emphasizes the role of field tests in the bureau’s decision-making, a point Warren raised at a Dec. 6 symposium at Treasury, according to one attendee, Ira Rheingold, executive director of the National Association of Consumer Advocates.

Warren told the audience that “we’re going to be data- driven. We’re going to test things, and figure out what people respond to,” Rheingold said in an interview.

‘Asking a Lot’

Not everyone studying the mortgage industry believes that simpler forms will translate into more comparison shopping by borrowers.

“It’s asking a lot for a piece of paper to change actual consumer behavior,” John Kozup, an associate professor of marketing at Villanova University and director of the Villanova Center for Marketing and Public Policy Research, said in an interview. “It could be a decision aid but that is it.”

Kozup, who also attended the Dec. 6 symposium, said that by the time applicants get a mortgage pre-approval and find a house, they “have a psychological commitment to a certain bank or broker, and no kind of disclosure is going to change that.”

To contact the reporter on this story: Carter Dougherty in Washington at cdougherty6@bloomberg.net.

To contact the editor responsible for this story: Lawrence Roberts at lroberts13@bloomberg.net.

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Sunday, December 5, 2010

RESPA FAQ vs. RESPA Roundup I'm VERY confused - Bankers Online

I am still having trouble reconciling the RESPA FAQ to the July RESPA Roundup – this is true even after reading much discussion in these threads.

We are still handling OTI the same way we did it when the new RESPA rules went into effect in January because I was waiting for more clarification - or something - from HUD. This is what we do (which I believe follows instructions in the FAQ):
A) Always put OTI on the GFE for home purchase loans.
B) Put OTI in the borrower’s column on the HUD-1.
C) Show a credit for OTI in the 200 Series and a charge to the seller in the 500 series.
D) The comparison chart contains amounts in the GFE and HUD column for OTI.

Our Software vendor seems to be making changes to comply with the RESPA Roundup which says:
“If the consumer did not purchase a service that was listed on the GFE (usually owner’s title) there should be nothing entered in that line on Page 2 of the HUD-1 and the estimate of the charge should not appear on the comparison chart on Page 3 of the HUD-1.”

1) Is the “consumer” in this case our borrower or does it mean any consumer (seller) associated with the loan?
2) Is HUD saying to show the OTI in the Seller’s column of the HUD-1?
3) Does HUD still expect us to put the OTI on the GFE for a purchase?

We usually pay for the flood determination rather than passing the fee to the consumer. We handle it basically the same way we do the OTI.
•Does this also fall off of the comparison chart now?

What I want to ask is Why? Why? Why? But I know it’s pointless so I won’t.

Taken from the Banker Online Blog.

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Monday, November 15, 2010

Joint Trade Letter on RESPA TILA Rule Changes

The following is an exerpt of a letter from a list of trade associations encouraging Tim Geithner, Ben Bernanke, and Shaun Donovan to consider combining some of the forms that need to be executed in the mortgage process.  Read the entire letter here

The undersigned trade associations, representing the real estate finance industry, appreciate the Board's and HUD's efforts to improve disclosures to mortgage borrowers under the Truth in Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA). At this point, however, Special Advisor to the President Elizabeth Warren and Treasury staff have begun discussions internally and with stakeholders to combine the two disclosures into a single, integrated disclosure, and we understand that effort will be a first priority of the new Bureau of Consumer Financial Protection (Bureau). Every segment of the financial services industry shares the objective of doing something "exceptional" to improve the mortgage disclosure process for consumers and we fully support this important work. Both disclosures are provided to borrowers throughout the mortgage process and integrating them will greatly increase transparency and consumer understanding of the mortgage transaction. Notwithstanding, it is important to recognize that this vital initiative is being undertaken in the midst of a surfeit of proposed and final regulations that require fundamental changes to the mortgage finance business model and a generation of systems which support it.

Read the entire letter at scribd.com

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RESPA – Changed Circumstance » The Insider

I am starting to see a lot of files that have re-disclosures for a changed circumstance when in fact there was no change.  It seems that many of you are using a changed circumstance because it is the only way that you have access to certain fields.  Specifically, when a loan is locked or extended, you need to update the GFE date and add NA to block 4 of the important dates section. 

What I am finding is that processors are the ones who are printing re-disclosures when a loan is locked or extended instead of the loan officer.  This is the problem.  Under the SAFE Act, only licensed mortgage loan originators are permitted to communicate with the customer either orally or in written form when it has anything at all to do with the rate.  Encompass is programed with this in mind.

Let me refresh everyone on the changed circumstance.

First, not everything is a changed circumstance.  For example; locking a loan is not a changed circumstance; adding a property address after issuing a GFE with TBD address is not a changed circumstance.  The new RESPA regulation defines a changed circumstance as follows:

“Changed circumstances” is now defined in § 3500.2 as: (1) Acts of God, war, disaster, or other emergency; (2) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.

None of the information collected by the loan originator prior to issuing the GFE may later become the basis for a “changed circumstance” upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE. In addition, the loan originator is presumed to have relied on the borrower‘s name, the borrower‘s monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator before providing the GFE. The loan originator cannot base a revision of the GFE on this information, unless it changed or is later found to be inaccurate.

The bottom line is that loan originators are expected to get it right the first time and there are not many acceptable reasons to issue a revised GFE.  If there is an acceptable changed circumstance, $the loan originator must document the reason for the change$ and provide it to underwriting with the file.  If a new GFE is issued do to an acceptable changed circumstance, only the items affected by the changed circumstance may change; everything else must remain the same.

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Thursday, November 11, 2010

MBA Calls for Improved Disclosures for Borrowers Under RESPA and TILA | Mortgage News | Daily National and State Headlines

Family First Time Buyers/Credit: Brand X Pictures

The Mortgage Bankers Association (MBA), along with several other mortgage industry trade associations, has sent a letter to Timothy Geithner, Secretary of the U.S. Department of the Treasury; U.S. Department of Housing & Urban Development (HUD) Secretary Shaun Donovan; and Federal Reserve Chairman Ben Bernanke calling for improved disclosures for mortgage borrowers under the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedures Act (RESPA).

The letter explains that if TILA and RESPA disclosures were harmonized and made simpler, consumers would be better equipped to navigate the homebuying marketplace, better understand their mortgage and settlement costs, and shop intelligently to meet their home financing needs. Therefore, the letter urges regulators to work with Elizabeth Warren and the new Consumer Financial Protection Bureau (CFPB) Director, to develop a comprehensive plan for disclosure reform that includes an agenda and timetable to propose, finalize and implement all mortgage disclosure revisions by the Board, Bureau and other agencies in an orderly manner.

Click here to view a copy of the letter.

For more information, visit www.mortgagebankers.org.

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Wednesday, October 20, 2010

Lexology - HUD adopts RESPA exemption for certain silent seconds

Addressing concerns raised by providers of a common form of mortgage loan assistance, the Department of Housing and Urban Development (HUD) decided to exempt certain silent second lien mortgage loans from the requirements to provide a good faith estimate and HUD-1 under the Real Estate Settlement Procedures Act (RESPA).    

State housing agencies, nonprofit organizations and similar entities often provide mortgage assistance to home buyers by extending a second lien mortgage loan for down payment and/or closing cost purposes. The loans, commonly referred to as “silent seconds,” often provide for no interest rate or periodic payment, often are either forgiven or require repayment based on certain events, and often have no or minimal fees. The loans pose disclosure issues for purposes of the good faith estimate and HUD-1 under RESPA. For example, the documents require the disclosure of various loan terms, including the repayment terms.

Requests for an exemption from the good faith estimate and HUD-1 requirements were made to HUD by administrators of various silent second programs. The administrators advised that producing good faith estimates and HUD-1s is difficult for silent seconds, and that the disclosures provided for in the documents are of little benefit to borrowers given the nature of silent seconds.

HUD decided to use its exemption authority under RESPA to exempt silent seconds meeting certain conditions from the requirements to provide a good faith estimate and HUD-1. The conditions are as follows:

  • The loan is a subordinate lien loan; and
  • The purpose of the loan is:
    • Down payment, closing cost or other similar homebuyer assistance, such as principal or interest subsidies; or
    • Property rehabilitation assistance; or
    • Energy efficiency assistance; or
    • Foreclosure avoidance or prevention; and
  • The loan carries a zero percent interest rate; and
  • The repayment terms are as follows:
    • Repayment is forgiven, incrementally or at a date certain; or
    • Repayment is forgiven, incrementally or at a date certain, subject to certain ownership and occupancy conditions (e.g., the recipient must maintain the property as his or her primary residence for five years); or
    • Repayment is deferred for a minimum of 20 years; or
    • Repayment is deferred until sale of the property; or
    • Repayment is deferred until the property is no longer the primary residence of the recipient; and
  • The total of the settlement costs assessed to the recipient for the subordinate loan is less than one percent of the amount of the subordinate loan and includes, at most, charges for the following items:
    • Recordation fee;
    • Application fee; and/or
    • Housing counseling fee; and
  • At or before settlement the recipient/mortgagor receives a written disclosure that effectively describes the loan terms, repayment conditions and any costs associated with the loan.

The exemption for qualifying silent seconds applies only to RESPA sections 4 and 5 —the good faith estimate and HUD-1 Settlement Statement. The exemption does not apply to any other RESPA sections, including section 8.

Silent seconds also pose issues with regard to disclosures under the Truth in Lending Act (TILA). The Federal Reserve Board has not issued any similar exemption for silent seconds with regard to TILA disclosures.

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Thursday, October 7, 2010

RESPA: HOME EQUITY PROTECTION ACT OF 2010 SEEKS TO BAN PRIVATE REAL ESTATE TRANSFER FEES (ALSO KNOWN AS "CAPITAL RECOVERY FEES") :: RESPA Lawyer Blog

US House Representative Maxine Waters and Rep. Albio Sires introduced a bill called the "Home Equity Protection Act of 2010" on Wednesday. The bill seeks to amend the Real Estate Settlement Procedures Act "RESPA" by prohibiting the collection of private transfer fees, also known as capital recovery fees or resale fees.

Often a housing or condominium developer establishes a legal covenant which requires the purchaser of a home in a large subdivision or condominium to pay a private transfer fee back to the developer or are allocated to the homeowners or condominium associations maintenance funds when they sell their home. The fees sometimes are often around one (1) percent of the sales price and the private transfer fee can often last as long as 99 years.

The private transfer fees have been controversial because some home buyers have claimed they were unaware of the restriction and in some cases the covenant doesn't require the homeowners signature at all. The proponents of making the private transfer fees illegal believe the fee strips the homeowners of their equity when they sell their property. Those in favor of keeping the private transfer fees intact believe it helps keep condominium and homeowners associations afloat by giving them needed capital to operate.

The Federal Housing Finance Agency proposed a similar rule which could prohibit Fannie Mae and Freddie Mac from insuring or purchasing mortgages that include private transfer fees. Several trade associations, including the National Association of Realtors and American Land Title Association, have applauded the legislation and are in favor of banning the private transfer fees.

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Wednesday, September 22, 2010

HUD page 4 question

Could someone please provide the following correct information..????

I deal with 5-6 different lenders and I have seen page 4 of the HUD prepared 3 different ways...

#1 The YSP is showing as a credit "Paid to the Borrower"

#2 The YSP is showing as a credit "Paid to the lender"

#3 The YSP is showing as a credit "Paid to our Bank" (our loans are table funded)

I've experience considerable delays with some of my closing wires due to confusion that is created when companies do not complete page 4 of the HUD in a consistent manner. I was told that page 4 of the HUD is more for disbursement purposes and does not have to meet the same standards as pages 1, 2 & 3 on the HUD... I know it sounds nuts (you would have thought with all the RESPA changes there would only be "1" acceptable way to show the funds disbursements on page 4)..... Please let me know if any one else has or is encountering this same issue.. Thanks.

by Loan-er September 19, 2010 9:52 PM


i agree, the GFE/HUD-1 may have been constructed with good intentions, but is a mess. Every lender has a different interpretation, and a competent title agency is most important. the change of circumstance is another gem(gov't at work).
by MikeM-NJ September 20, 2010 6:06 AM


Yes, the HUD-1 new HUD-1 form is a difficult beast to master. However, it only has 3 official pages, not 4. Page 2 is used to show loan originator charges and credits to the borrower for YSP in lines 801 and 802. Any additional pages detailing fees and costs are not required by RESPA.

It sounds like someone in your company (or at the companies you deal with) has created" a "page 4" for internal disbursement purposes. Perhaps it is simply the closer's disbursement record. In any event, since it is not governed by the RESPA rules closers and others will fill it out in a way that makes sense to them, which will likely vary considerably.
by oldbe September 20, 2010 10:24 AM


Old be is right, you are going to see variances in the disbursement page. It is purely a rehash of page 2 fees showing where they are going, it does help on the title end when trying to balance a wire...
by Donktard Borker September 20, 2010 10:31 AM

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Wednesday, September 15, 2010

Consumer costs increase with RESPA reform

As is often the case with newly implemented “consumer protection” regulations, the consumer ends up paying more. Today’s mortgage borrowers can expect to pay more as a result of this past year’s RESPA reform, according to a recent study by Bankrate Inc.

Estimated fees charged directly by lenders increased by 22.8 percent, while fees charged by other service providers (i.e., title companies) increased 47.2 percent, according to the study that was conducted in 49 states.

Now it is true that the Bankrate study only examined estimates provided by lenders and not what the consumer actually paid at the closing table. In other words, it may be the case that lenders are now over-estimating closing costs in order to avoid the penalties associated with the new Good Faith Estimate (GFE) tolerance limitations.

Assuming this is the case, what is the benefit to the consumer?  I suppose one could argue that the consumer is spared the “Day of Closing Surprise” element but, on the other hand, the consumer may be discouraged from refinancing or buying due to estimated costs that are purposefully inflated.

Posted via email from Title Insurance

Monday, September 13, 2010

eLynx Rolls Out eHUD Serviceto eCN

eLynx, a portfolio company of American Capital, said that it has released its new eHUD service, a component of the Electronic Closing Network (eCN), for lenders and closing agents to comply with RESPA regulations governing good faith estimates (GFE) and the HUD-1.

Recent changes to RESPA regulations limit the differences allowed between the fees disclosed on the GFE and the amounts collected from the borrower at the closing table. These controls require that lenders and settlement agents work closely to negotiate fees and limit differences on the HUD-1 while preparing mortgage documents, according to eLynx.

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Thursday, April 1, 2010

Respa Quiz and Answers Below « MeredithMortgageTeam's Blog

The Real Estate Settlement Procedures Act (RESPA) is a consumer disclosure and anti-kickback statute designed to inform consumers of their settlement costs and to prohibit kickbacks that can increase the cost of obtaining a mortgage. Take this quiz to find out how well you know about this important issue to stay on the right side of the law.

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